It might sound odd, but you might consider opening a money market account instead of a savings account. Most people have a checking and a savings account. The checking account is used for your normal transactions, while your savings account gradually gains interest on your money and helps you save up. What is a money market account, then?
What is a Money Market Account?
A money market account is sort of like a checking and savings account rolled into one. You can make withdrawal and deposits, write checks and transfer money electronically. Additionally, it will accrue interest, much like a savings account. You are also, usually, given an ATM card to use with a money market account. That makes them pretty convenient alternatives to traditional checking and savings accounts!
That said, there are a few limitations to the account type. Notably, you usually have to have a higher balance in a money market account than a checking or savings account. Additionally, you also can’t write a very large number of checks from it in a given period.
While those might sound like notable downsides, they’re largely mitigated by the upsides. For one thing, most money market accounts offer better interest rates than savings accounts. There are a few reasons for this, and they’re related to the aforementioned downsides. Firstly, since you have to float a higher balance in a money market account, they offer more money for the bank to invest with.
Secondly, the smaller number of checks you can write through a money market account means that there are lower fees for the bank to pay. Thirdly, the types of things money market accounts’ funds can be invested in are generally higher in return than the things savings accounts can invest in. Essentially, the regulations on this account type are different, meaning it can be invested more aggressively.
Should You Go This Route?
That depends on your personal funds. If you have a larger amount of money to save, a money market might be the right account type for you. It’s also convenient to have everything saved up in the same account. That convenience is furthered by the ATM card most of these accounts offer, giving you quicker access to your money.
If you tend to float lower balances however, such as if you are younger with less savings, these accounts might not be right for you. Of course, everyone’s financial situation is different. However, under the right conditions, a money market account could be a better option for you than traditional checking and savings!