Money Market Accounts vs Savings Accounts
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Do you know the difference between a Money Market and a savings account? Do you know which one is right for you right now? Which one gets you a little bit closer to your savings goals?
If you already have a savings account and are dedicated to putting away a certain amount of your paycheck each month, you’re doing better than most Americans.
But, how do you know when it’s time to look for something more than a regular savings account? Maybe you’re not quite ready to tie up your money in long-term investments and would like to have easy access to your funds. If you’re a finance commitment-phobic but want to make the most out of your savings, a Numerica Money Market might be a perfect solution for you.
A Money Market account is a savings without the separation anxiety you may feel with investment accounts like IRAs or certificates of deposit. Often lost in finance products of savings accounts, certificates, and investments, some key things to understand about Money Markets are:
- Differences between savings and money markets
- Benefits of a money market
- How a money market account works
Money Market vs Savings Accounts
What’s better, a money market or a savings account? That answer is different for everyone. It’s all about how much you’re saving, when you need the funds, and your balance.
If you have no savings, before making any other long term goals, make a goal to save $400 for an unexpected bill. From there, start saving for a specific goal like a vacation or building a 3- to 6-month emergency fund. And grow from there to think about long-term saving and retirement.
Remember - You can have more than one savings account!
A regular savings account is a great place to start your savings journey. After opening your account with as little as $25, there are no monthly requirements and it is easy to move funds to and from your Numerica checking account without a penalty.
Bonus Saver is a savings account that lets you earn as much 3.10% Annual Percentage Yield (APY) on your balance when qualifiers are met. Keep in mind that this high interest savings is on balances up to $2,500. After you hit that balance, you earn .10% APY like you would for a normal savings account and you continue earning high interest on your initial $2,500.
You want savings that earn you the most money. If you’ve maxed out your earnings potential with Bonus Saver, what’s next?
Money Markets give you different rates for different balance amounts you have in the account. So, the more money you put into a Money Market, the more money you can earn.
Some other characteristics of a Money Market account:
- Secure (not at risk from uncertain market fluctuations like stocks)
- Easy access to your money
- Earn a higher interest rate than a regular savings account
What are tiered Money Market balances?
Money Markets have a tiered balance approach. This means that there are groups of starting balances that will earn a specific interest rate. So, while you may not earn as much interest on your $3,000 balance as you would a $30,000 balance, you do earn more money than you do with a standard savings.
A couple things to keep in mind:
- As your money grows in a Money Market, you may advance to the next tier
- Each tier earns a better interest rate
- You can add funds to your Money Market account at any time
Benefits of a Money Market Account
The most notable benefits of a Money Market account include:
- Higher APY than a traditional savings account
- Flexibility to withdraw or transfer funds without penalties
- Open with as little as $25
- Diversify portfolio risk
How does a Money Market account work?
A Money Market account is like a hybrid savings account and checking account, you get the best of both worlds.
Like a traditional savings account, you earn an annual percentage yield (APY) on your balance. However, you tend to earn a higher APY than a traditional savings account with a Money Market account. You also earn a better APY the higher your balance is.
A Money Market account acts like a checking account
The checking account traits of a Money Market account give you the flexibility to spend directly from the account or transfer funds to other Numerica accounts. You get up to 6 debit or check transactions per month with unlimited transfers. Be careful that your spending doesn’t bump down your tiered balance!
A Money Market account is not a money market fund.
A money market fund is an investment that could lose value with market fluctuations. A money market fund doesn’t have the same flexibility as a Money Market account where you can spend or transfer funds without penalties.
Diversifying your investment portfolio is important, especially in an uncertain market (job, stock market, housing, etc.). Higher risk (with possible higher yield) options can grow your retirement (think 401K accounts), but that is very different from a Money Market account.
Having a variety of savings accounts, like a Money Market account, can help to improve your financial situation. It’s a no-risk, easy-to-access, higher-interest-earning savings account you can access right here, right now.
How do I set up a Money Market account?
Opening a Numerica Money Market account is as easy as visiting your local branch or calling 800.433.1837. You can talk more about finding the best savings options for you and find out current rates for your opening balance.