Saving money has become a major focus for Americans over the past two years, a trend that seems poised to continue in the years to come. In fact, recent data shows that Americans hope to save an average of $5,710 in 2022, and 40% are focused on building an emergency fund.
Many of those looking to boost their savings are also exploring the best ways to do so and considering different types of accounts depending on their goals. While high-yield savings accounts are one popular option, money market accounts can often yield a higher rate of return.
Much like savings accounts, money market accounts allow you to add funds at any time and provide easy access to your money. As interest-bearing accounts, they can also help to make your money go further through regular compounding.
Below, we share some key insights on the benefits of money market accounts, and tips on how to find an account that’s right for you.
A Better Way to Grow Your Savings
Where you decide to keep your savings can have a significant effect on how those savings will grow over time. The most common options include traditional savings accounts, high-yield savings accounts, certificates of deposit (CDs), and money market accounts.
While each has its benefits, money market accounts generally offer a broader range of benefits by combining the flexibility of savings accounts with a higher-than-average interest rate. In fact, as of February 22, 2022, the average interest rate for a money market account was 0.08% for a balance below $100,000 (compared with 0.06% for a savings account).
Although traditional savings accounts and high-yield savings accounts provide the same flexibility as money market accounts, they typically offer a lower interest rate. And while CD interest rates are on par with those of money market accounts, they generally charge an early withdrawal fee if you want to access your money before its maturity date.
Money market accounts, on the other hand, are a solid option for both short- and long-term goals, and the annual percentage yield (APY) is generally much higher than the national average.
Easy Access to Funds
Unlike CDs which charge a penalty for early withdrawals, money market accounts make it easy to access money when you need it. What’s more, you can make up to six withdrawals per statement cycle.
Banks and credit unions use the funds in a money market account to invest in short-term liquid assets including Treasury bills (T-bills) or municipal bonds. The banks then earn interest on those investments and divide the interest with account holders. This makes money market accounts the right choice for those who want to easily access their funds while tapping into the benefits of low-risk investments.
A Secure Place to Keep Your Money
Another key benefit of money market accounts is that they are generally FDIC insured. As a result, they carry lower risks than investing in stocks or bonds. While your returns may not be as high as they would be when investing in the stock market, money market accounts are considered to be a more secure place to keep your money.
One thing to note: it’s best not to confuse a money market account with a money market mutual fund, or a money market fund. Money market funds are not insured by the FDIC, which means that you could potentially lose money by investing in one. Money market accounts, on the other hand, offer the same security as traditional and high-yield savings accounts, but the rate of return will likely be much higher.
How to Choose the Right Account
No matter your circumstances, savings vehicles are a great way to grow your money effectively. If you’re looking for a secure place to keep your money, a money market account can provide those benefits.
When choosing an account, it’s important to consider both the interest rate and the bank offering it. With a highly competitive rate of 0.45% Annual Percentage Yield (APY) and just a $100 minimum opening deposit requirement, the CIT Bank Money Market Account is a solid option. It’s also FDIC insured and has no monthly service fees. Additionally, you can deposit checks remotely and make transfers with the CIT Bank mobile app.
To help you optimize your savings goals even more, CIT Bank also allows you to build an emergency savings fund that protects against job loss and medical issues or home repairs. They also make saving to buy a home much easier so you can grow your money with competitive rates—and then access your funds when you find your dream home.
Overall, increasing your savings requires careful planning and consideration. Your hard-earned money deserves a hard-working bank so that you can reach your savings goals.