A money market account is one way of saving money, especially if you have many thousands of dollars to save. However, a money market account isn’t the right option for every family. If you’re thinking about transferring your money to a money market account, you want to know whether this is the right option before you start looking at the highest paying money market accounts. Here are a few questions to ask yourself before you start looking into money market accounts.
1. Do You Want Your Money to Be Insured?
A money market account at an insured bank is FDIC-insured up to $250,000 per person, or $500,000 for a joint account. That means if something happens and the bank fails and loses your money, you can receive the money from the FDIC within a few business days. Insurance is only available with certain kinds of accounts, so if you want your money to be insured, a money market account may be the right option.
2. How Risk-Averse Are You?
Depending on the level of risk that you’re comfortable with, you may decide that you want to invest in a number of ways. Money market accounts are extremely safe investments; you simply deposit your money into the account and earn interest. However, some people are more comfortable with a certain level of risk, and in this case, you might be willing to deposit some amount of your money into a riskier investment like stocks and ETFs.
3. How Much Money Do You Have to Deposit?
This is one of the more important questions that you might want to answer before you decide where you’re going to invest your money. A money market account will often have a monthly fee that you can reduce by having a certain dollar amount in your account, and very high deposit amounts may unlock higher APY. If you have a smaller amount of money to deposit, a money market account might not be the best option.
4. How Regularly Do You Need Access to Your Money?
Money market accounts have certain legal restrictions on them that put a cap on the number of transaction you can make to and from the account in a month, but you may withdraw a significant amount of money and transfer it to your checking account at any time. If you’d prefer to have the money readily available, a money market account might be perfect, but if you’re okay with putting the money away for many years, a different account might work better.
A money market account definitely isn’t a bad choice for anyone who’s looking to store their money away for some time. However, because there are so many ways for people to invest their money, it also might not be the best option. These four questions can help you decide whether a money market account is the right way to invest your money, or whether you might want to go with a different option