Okay, I have to admit that I am a savings dork. While I am quite willing to place my long term investments like retirement funds in riskier stock funds (balanced with bonds… of course), I am nervous about putting my shorter term savings accounts in them.
Currently I utilize a standard savings account and CDs for my short term investments, although my customer service rep at my bank keeps subtly hinting I may be throwing some money away in this choice. The talk of the town for saving these days seems to be money market accounts. Therefore, my thought was to write about them in hopes of maybe even convincing myself to give it a try.
Money market accounts are like savings accounts (and some of them are also checking accounts), except the money is not FDIC insured. Still, many financial institutions describe them as relatively secure due to the limited volatility and stability of the banks behind them. The key to this is the rules governing a money market fund. Regulations require the money to be invested conservatively.
While this money is invested in the “market” (as the name implies) it still operates much like a savings account. Instead of interest paid, the account receives gains through market fluctuations. Due to the structure of these accounts, most experts agree that even if the actual market fund failed… the banks would still eventually dish out your original deposit. It just might take a little longer than you would like.
Okay… am I convinced yet? Maybe. Certainly I could see placing some of my shorter term savings in a money market account. But, I don’t think I am ready to stomach placing my emergency funds there. Those really should sit in an “always ready when you need it” sort of place. I definitely don’t want my checking account to be a money market. Still, I would like to see my money do better than the 2% a year savings account. Hmmm… I just might be making my bank rep happy this year!
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