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It’s a good time to be a saver, as the Fed is expected to continue increasing interest rates — and many Americans are taking advantage.
In fact, 60% of U.S. adults say they were able to build up their personal savings over the past two years, and 69% of that group said they plan to maintain their new savings rate in the future, according to Northwestern Mutual’s 2022 Planning and Progress Study.
If you’re part of that majority, not only is it important to consider how much you save, but also where you keep your cash.
Two common options for saving money are savings accounts and money market accounts. Though they work very similarly, there are some differences to keep in mind before you open a new account. They account type that’s best for you is dependent on how much money you have available and the intended use for the funds.
Here’s what you need to know to choose the best vehicle for your savings:
Money Market Account vs. Savings Account: What’s the Difference?
Both money market accounts and savings accounts are liquid, low-risk accounts best used for an emergency fund or short-term savings goal. Here are some key differences between them:
- Interest Rates: Traditionally, money market accounts had higher APYs than savings accounts. However, that’s not usually the case today. There are plenty of high yield savings account options with rates just as competitive as money market accounts.
- Checking Privileges: With a savings account, you can usually only make withdrawals by transferring money to a checking account or by visiting a bank or credit union branch and requesting a withdrawal through a bank teller. By contrast, money market accounts often include checking privileges, meaning you can write checks to pay for things from the account.
- ATM Use: Savings accounts usually cannot be accessed by ATM. But with a money market account, you may receive a debit card that you can use to withdraw cash at an ATM. Just know that some banks and credit unions limit the number of withdrawals or transfers you can make per month.
- Minimum Balance Requirements: Money market accounts usually have higher minimum balance requirements than savings accounts. And they may offer higher rates for different balance levels. For example, a money market account may offer …….
Source: https://time.com/nextadvisor/banking/money-market-account-vs-savings-account/