Tips & advice on getting your finances back on track.
I am hoping you can answer my question. We have always had a traditional savings account. The interest rate that is being accrued on the account is abysmal and the bank recommended that I look into a money market account. What exactly is a money market account?
A money market account is a type of savings account. The account typically accrues more interest than a traditional savings account, but there are some stipulations to this account. Usually, the initial deposit and balance requirement on a money market account are higher than those on a traditional account. The average minimum balance is typically between $1000 and $2500. There are restrictions on access to the account. Federal regulation prohibits more than 6 monthly pre-authorized or electronic payments, withdrawals or outgoing transactions from a money market account. There is typically a fee charged for each transaction after that.
The funds in a money market account are protected by the FDIC if in a bank, or NCUA if in a credit union. A money market account is a great place to keep money for an emergency savings account. An emergency savings account should be used sparingly. It is recommended that you have a minimum of three months expenses saved in the account. The money market account will allow you access to your money and provide a higher interest rate.
I suggest that you shop around for the best deal. Websites like Bankrate.com will provide you with current interest rates. Interest rates will differ from bank to bank. I wish you all the best and congratulate you on your goal to save!
Kim Cole is the Education Outreach Coordinator for Navicore Solutions. Kim provides financial education workshops and seminars to communities. Readers can submit general questions relating to personal finance, credit scoring, debt management, student loans, home finance or bankruptcy which may be highlighted in the next month’s edition. All identifying information will be kept anonymous.
Please send your questions via email to DearKim@navicoresolutions.org