What are the similarities between money market accounts and traditional savings accounts?

Although money market accounts are different from traditional savings accounts they are similar in many ways.  Both are safe options for investment and are backed by the FDIC.  These are the normal choices amongst the wealthier customers.  However, each one of these is peculiar in certain ways.  Although, they may not be as different as oranges and apples, they are not really the same either.  It is worth knowing a bit more about both these accounts in case there are investment plans in the offing.

Some of the special characteristics about the money market accounts are that they are usually thought of as long term investments that are less liquid.  Money is deposited in chunks in many accounts by meeting the requirements of a minimum balance.  The funds here will remain for many years while earning handsome interest.  The rates could be compared online in order to get the best deal as well as to educate one on the specific offers that are available.

The money invested does not necessarily have to stay locked in for a particular duration.  MMA’s are pretty liquid and the money can be withdrawn by writing a check however, there might be financial institutions that put a limit on the number of withdrawals per month.

The traditional savings account is a kind of intermediary between a checking account as well as a money market account.  Although one might want to save it, there might be frequent requirements for withdrawals as well.  Savings accounts offer lower interest rates than money market accounts.  The rate of interest also could vary between banks.  This is partly because there is more liquidity and easy accessibility to funds in a savings account.

These days there are high-yield savings accounts that pay a higher rate of interest.  Savings accounts with debit cards as well as online savings accounts are another example where the interest offered is higher.  This is due to the fact that the service costs are cut with online banking but they still manage to make a profit.

However, the fundamental appeal of a traditional savings account has not changed despite these two new additions where better interest rates are offered than a checking account while maintaining easy accessibility to funds than a MMA.

If one observes closely, one can see that both savings account as well as money market accounts is closely similar despite being a little different.  Both are great options to save and let the money grow without risking losing the money.