Saving in a low-yield world
Safe havens: Money market accounts

Safety is the name of the game when it comes to your savings. The last thing you want when trying to build a savings cushion is to lose it all and return to square one.

Fortunately, you can stash savings in a number of safe financial instruments that also reward your efforts with a little free money in the form of interest.

While they aren't going to set the world on fire with sky-high returns, the following investments each provide a safe place to park your savings:

Places to park your cash

Money market accounts

  • What they are: A money market account, or MMA, is an interest-bearing deposit account. This type of account should not be confused with money market funds, which are mutual funds that normally are not insured. MMAs typically earn higher interest than savings accounts and require higher minimum balances. In exchange for better interest earnings, consumers usually have to accept more restrictions on withdrawals, such as limits on how often you can access your money.
  • Risk: Most money market accounts are insured by the Federal Deposit Insurance Corp. or the National Credit Union Administration (for credit unions), meaning they can't lose principal on account balances of $250,000 or less through Dec. 31, 2013. On Jan. 1, 2014, the standard insurance amount is scheduled to return to $100,000.

    However, you could lose some or all of your principal if your account is among the few not insured.
  • Liquidity: Federal regulations limit withdrawals to six per month (or statement cycle), of which no more than three can be check transactions.
  • Pros and cons: MMAs are safe investments that often allow limited check-writing privileges. However, it's important for investors to shop around because interest rates vary. Withdrawals are limited to a certain number each month, and fees can add up quickly if you don't maintain a certain minimum balance. Earned interest is subject to income tax.

    If inflation rates exceed the interest rate earned on the account, your purchasing power could be diminished.
  • Where to find them: Banks and credit unions offer MMAs. Bankrate can help you find the best money market rates currently available.



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