So what is a money market account? Simple: Money market accounts are kind of like your checking account and your savings account had a much more useful baby. It’s a hybrid, combining the great attributes of a checking account with the security and interest earned from your savings. They allow you to have access to your money in the way your checking account does, while giving you earned interest. Sounds pretty good, right?
Remember, your savings account differs from your checking account in two simple ways: First off, you have less access to it–these accounts usually aren’t connected to your ATM card. This makes your savings safe but also inaccessible, which can be a pain if you have to transfer money between accounts. Federal law limits your transfer/withdrawal transactions to six per month, making that money both safe and somewhat annoying. The advantage is the second difference, however—you earn money on interest. Unfortunately, it’s not very much.
Putting your money in a savings account basically gives your bank permission to invest in solid, low-risk bonds. This means huge security but low earnings: usually around 1 percent. So if you have $1,000 in savings you’ve earned a total of $10 that year for your worth investment. Yay! You can now buy a sandwich in New York.
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