Money Market Savings Account Benefits

A money market savings account is a type of interest-earning financial account that savers can set up with a lending institution such as a bank. A money market savings account is similar to a traditional savings account, but access to funds may be limited and accounts often require minimum deposits to open. Money market savings accounts offer several advantages to savers.


Interest Rates

One of the primary benefits of a money market savings account is that the interest rates offered are typically higher than those associated with checking accounts and traditional savings accounts. A higher interest rate means savers earn more money over time. Banks are willing to offer higher interest rates on money market accounts, in part, because of restrictions such as account minimums and withdrawal limitations. Essentially, savers may sacrifice flexibility in exchange for higher earnings. Certificate of deposit accounts go a step further, and require savers to keep their money in the account for a predetermined period in order to earn full interest. Certificate of deposit accounts typically offer higher interest rates than money market accounts, but have less flexibility.
 
Stability

Money market savings accounts are a stable way to earn a positive return on money. Unlike investments such as stocks and mutual funds that can go down in value, money market savings accounts always earn interest. Interest rates on money market accounts typically fluctuate based on overall interest rates in the economy. In periods of rising interest rates this can make money market accounts more desirable than certificate of deposit accounts, since certificate of deposit accounts typically lock the saver in at a given interest rate. 

FDIC Insurance

Money market savings accounts are typically insured by the FDIC, just like standard savings accounts. According to the FDIC, its "insurance covers depositors' accounts at each insured bank, dollar-for-dollar, including principal and any accrued interest through the date of the insured bank's closing, up to the insurance limit." The FDIC insures deposits up to $250,000 as of June 2010. This is an additional guarantee that money saved in a money market account will be safe, even if the lending institution has financial difficulties.

Access to Funds

Money market accounts can vary as to how accessible your funds are. Some money market accounts may allow check writing or even ATM withdrawals. Accounts can often be tied to other accounts at the same institution, such as traditional checking accounts, allowing savers to easily transfer money from one account to another.