Investing In The Stock Market

You’ve heard the name.  Everyone talks about them.  Financial firms boast about the quality of their offerings for these products.  “That all well and good,”  you say, “but what in the world is a money market account?”  Good question.  Simply put, a money market account is like a savings account that offers higher interests rates in exchange for certain restrictions.

Like a savings account, you are restricted to six withdrawals per month, and only three checks.  Some even have restrictions above and beyond that of normal savings accounts, such as high minimum balances.   As a result of these restrictions,  you get a better rate of interest.

Like a normal bank account, money market accounts carry FDIC insurance from the government,  insuring your deposit up to $200,000 as of the time of this article’s writing.  This is an important protection against the potential failure of the financial institution.  This makes money market accounts quite safe.

A money market deposit account differs from a money market fund.  A money market fund is like a mutual fund, where the funds deposited by the investors are invested on the behalf of the depositors by a fund manager.  These funds do not carry the protection of FDIC insurance like the deposit accounts do.  Still, these funds can be a good place to keep cash in an investment account, a topic we will discuss more later.

So, I hope this helps you understand money market accounts a bit better.  It’s not strictly related to stock market investing, but knowing where to keep your cash is an important part of an investment strategy.  In other articles, we will discuss the use of money market accounts and funds for keeping your cash handy for when you need it later.