How to manage a money market account
Just because you have found a money market account that pays high interest doesn't mean you should pat yourself on the back, throw money into it and forget about your investment.
A money market account is, in essence, a savings account that pays a higher interest rate. But there's a trade-off, in the form of restrictions on the minimum balance and number of withdrawals allowed per month.
While a money market account is considered a "safe" investment -- and is often the choice of conservative investors -- it doesn't mean that it doesn't need care and management.
Here's what you should be doing on a monthly basis:
- Check fees and service charges to make sure that you are keeping the minimum balance requirements. You don't want to incur fees that are higher than what you are gaining on interest rates.
- Make sure that you are not withdrawing more than the maximum per month (usually six checks or ATM withdrawals). If you go over the maximum, you may be slapped with a fee -- usually around $5 to $10.
- Check the interest rate on your balance. Make it competitive with other banks' money market accounts.
- Keep your register up to date. This register looks like a checkbook register, where you can enter all your deposits and withdrawals. Each month, reconcile your register with your online banking or paper statement.
- Make consistent deposits. If you are having trouble remembering to make deposits into your money market account, ask your bank about automatic transfers from your checking or savings into your money market account -- even if you start with just $25 or $50 a month. Your savings will add up and you'll get a better interest rate than if the money was sitting in a traditional savings or checking account.
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