Money market vs. saving accounts – which is better?

Both money market and savings accounts are means by which consumers tend to save money for their future requirements. Both are financial tools that are offered by different banks and organisation with the motto to ensure growth in the investors’ investment. 

There are same basic differences between money market and savings account that will help investors to decide which type of account will be beneficial for them and will provide low risk growth of their finances. 

Comparison between Money market and savings account 

  1. The savings accounts are believed to be more secure than money market accounts. The reason behind this is that the funds deposited in the money market accounts are used for trading in the market. If the market performs well then the money market accounts show huge growth or in case there is a fluctuation in the rates, these account holders can incur heavy losses. The funds in the savings accounts have no such fear. The consumer is assured of the principal amount any time he wishes to withdraw the whole amount.
  2. The funds in money markets accounts are time locked. This means that the financial institutes invest the funds saved in these accounts on different shares for a fixed period of time and then allow the investor to withdraw the money with the interests. The savings accounts are short termed investment plans.
  3. The funds in the savings accounts are liquid and easy to access. Debit cards, checks etc can be used to withdraw or deposit funds from the savings account any time and from anywhere. This is not the case with funds in money market accounts. They remain inaccessible for a certain period of time and can attract heavy charges and penalties if withdrawn before the stipulated time period.
  4. Money market accounts have higher minimum balance requirements than normal savings accounts. The amount of money that a user wishes to invest depends on him entirely.  On the other hand savings accounts require investors to maintain a minimum balance but which is not higher than that in case of money market funds. Charges are levied in case the minimum balance remains low for a certain period of time.
  5. The interest rates of money market accounts are little higher. Since the funds in these accounts are open to higher risk therefore banks offer higher interest rates to attract more customers. The savings accounts on the other hand the least risk accounts. They therefore have lower interest rates.   

The type of account that an investor will choose depends on his need. If an investor wishes to be ready for the rising costs of things in the future then money market accounts are the best options for him. A safer investor will choose savings account for peace of mind.

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