For those who have saved a bit of cash, it can be hard to decide which of the many investment options out there is the best fit. Especially during times of market volatility, investors want a solution that can put their money to work while not being too risky.
If you find yourself with a growing savings account and want to invest conservatively, all while still having access to your money, consider a money market account.
What is a money market account and how does it work?
Much like a savings account, a money market is a deposit account that earns dividends based on current interest rates. The advantage over a savings account is that because these rates fluctuate, they are usually higher than the average savings account rates.
A money market account has a minimum required balance to start earning dividends. For example, at Member One Federal Credit Union, once you deposit the minimum balance of $2,000 you can begin earning dividends. With every increase in balance the dividends paid out also increase.
Another similarity to a savings account is that the account holder has access to their funds. In-person withdrawals are unlimited, but federal law restricts the number of online or mobile transfers to six per month.
In short, think of a money market account as being similar to a typical savings account, but with better rates of return on your money.
How is a money market account different from other investment products, like a certificate of deposit (CD) or share certificates?
Money market accounts pose some distinct advantages over other investment products, such as certificates of deposit or share certificates.
CDs and share certificates both have time requirements for your money to be invested. For example, a CD might offer a higher interest rate of return than a money market account, explains Nerd Wallet, but it will require you to keep your money untouched for anywhere from one to five years.
While knowing your guaranteed rate of return can be beneficial, you can get the same benefit from investing in a money market while still having access to your funds.
What makes money market accounts stand out is that there is no time requirement for investing and the rates are still competitive.
"You’ll still have access to your funds if you’re not quite ready to commit several months or years to a share certificate or CD," says Member One Federal Credit Union. "You won’t see immediate gains like you could with the stock market; however, it’s a good start if you’re not quite ready to take the higher-risk stock market plunge."
Additionally, many money market accounts offered by credit unions offer tiered dividend returns. That means the more you invest, the more you get in return.
Have some cash in your account but aren't sure where to start? Consider contacting Member One Federal Credit Union to discuss your investment needs and options. Working with a trusted, knowledgeable professional can help get your investment portfolio working for you.
Jason Bell is a graduate of the University of Utah and works as a full-time educator. He enjoys automotive consulting, as well as spending time with his wife, family, friends, and cars. Contact him at firstname.lastname@example.org