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Finance Fundamentals: The Breakdown of Savings vs. Money Market Accounts

You’re looking to stash your cash somewhere safe so you can save it for a rainy day. Hiding it under your mattress is so 20 years ago and gave you too much wiggle room for sneaking out a $5er or a $100 every so often for a little impulse spending. Out of sight, out of mind is what you’re looking for.

So, you start shopping around different banks and credit unions for a savings account to lock up your emergency money or your vacay funds. You find that many financial institutions offer savings accounts and money market accounts, and you can’t quite pinpoint what the exact difference is.
 

So...What is a Savings Account?


Believe it or not, a savings account is an account… where you save… money. Mind. Blown. In all seriousness, you can open a savings account with local banks and/or credit unions that might require a minimum balance (which, if at all, is a fairly small amount). It’s easily accessible cash that you can use to withdraw, transfer amongst accounts, pay bills, or earn interest by keeping it put. The interest you’ll earn will be small but hey, it’s better than nothing! You’ll get an ATM card to manage this account, but you won’t get a debit or credit card to spend the account’s money – that’ll be a checking account you’ll need to set up separately – so you can truly just save, save, save.
 

Okay, Gotcha. Then, What is a Money Market Account?


Glad you asked. They are essentially the same with a few more perks as well as a few more restrictions. You can earn more interest with money market accounts than you can with a savings account, but your initial deposit/minimum balance will be higher. Sometimes, money market accounts will grant you check-writing functionality and debit card access. Just as a savings account may charge occasional maintenance fees, so does a money market account. Both also have variable interest rates meaning they fluctuate and can change at any time, but money markets will always be higher than savings. Earnings are tiered so the more money you store in the account, the more you’ll attain in interest.
 

I Think I’m Following. Which Should I Choose?


That depends on how much you want to save and what your starting point looks like. For smaller sums of money, a savings account is an excellent first step. As you acquire more funds and can reach your financial institution’s minimal deposit for a money market account, it’s probably in your best interest to switch it on over so you can earn more with interest. Who doesn’t look a little extra moolah?

Don’t forget there are several other ways you can save and earn money, too. From Saver Certificates to IRAs and more, Frontwave Credit Union offers hands-on service and exceptional products to help you live out your financial dreams. Stop by your local branch to learn more about our extensive list of savings options or give the team a ring at 800.736.4500.