Who Typically Uses Money Market Accounts?
Written by
Caitlyn Moorhead
Edited by
Melanie Grafil
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Saving money is more than just storing money away. It’s also weighing and researching the type of savings account or product, and seeing which can truly help you earn and grow more. When opening an account, whether it’s a high-yield savings account, certificate of deposit or money market account, be sure to familiarize yourself with the subtle nuances of what each can offer, and which would be best for you as the account holder.
What Is a Money Market Account?
Money market accounts are deposit accounts offered by financial institutions, banks or credit unions that typically earn a higher interest rate than a traditional savings account or high-yield savings account. Money market accounts offer the best of both worlds from a checking account and a savings account.
They are safe, secure and insured by either the FDIC or the National Credit Union Administration, or NCUA. These accounts are also not to be confused with money market mutual funds, which are considered a different type of investment.
How Money Market Accounts Work
With a money market account, you might not have the same access to this account as other types of savings or checking products, as there may be limits to the number of transactions you can make by debit card, electric transfer or physical check writing privileges. There might be a minimum amount required for deposit and generally a minimum balance requirement to maintain.
What Type of People Use Money Market Accounts?
Though money market account rates seem to be more designed with savings in mind than checking account daily use, these are great for short-term savings goals, as they tend to have a higher annual percentage yield or APY. Your money market funds are just as safe as any other deposit account in a bank or credit union.
The interest rate you receive on your account balance may not be able to keep up with certain penalty fees or monthly fees you have incurred during a statement cycle, which could result in the value of your account dipping beneath the initial deposit. If you are wondering where to start looking, the following are examples of banks or credit unions with highly rated money market accounts:
- VirtualBank
- Ally Bank
- Capital One*
- CIT Bank
- UFB Direct
- Barclays
- First Capital Bank
- U.S. Bank
- Sallie Mae
- Quontic Bank
- Connexus Credit Union
Final Take To GO: Who Is a Money Market Account Best For?
Opening a money market account might be the best route for those with short-term savings goals as opposed to long-term goals such as retirement. They are great for a savings account balance you can actually access, and earn more interest than a standard savings account. This type of account is suited well as an emergency fund too, since you can keep at least three to six months’ worth of expenses.
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Fun fact: If you’ve been wondering about whether or not rich people use money market accounts, you may be surprised to find that one of the richest people on the planet is known for his diversified money market portfolio.
CEO of Berkshire Hathaway, Mr. Warren Buffett himself has many money market accounts and Treasury bills. Millionaires and billionaires such as Buffett also have zero-balance accounts with private banks. This allows Buffett to leave his money in cash and cash equivalents and write checks on his zero-balance account.
FAQ
Here are some answers to frequently asked questions about who typically uses money market accounts.- What type of people use money market accounts?
- Though money market account rates seem to be more designed with savings in mind than checking account daily use, they are best for those with short-term savings goals as opposed to long-term goals such as retirement. Your money market funds are just as safe as any other deposit account in a bank or credit union.
- Who is a money market account best for?
- Money market accounts are best for those with short-term savings goals as opposed to long-term goals such as retirement. This type of savings account balance allows you access to your funds and earns more interest than a standard savings account. It is well-suited as an emergency fund, where you can keep at least three to six months' worth of expenses.
- What do people use money market accounts for?
- Money market accounts are deposit accounts, as well as savings products used for savings goals such as emergency funds or earning a higher APY similar to that of CDs. Except, unlike a CD, which doesn't allow you to touch your money for several months, a money market account is much more easily accessible.
- Why would someone use a money market account instead of a checking account?
- You would use a money market account over a checking account when you want to earn a higher APY. Or, if you didn't want to worry about a limited amount of transactions per month, as you would have with a checking account. This means a checking account is still advised for your day-to-day banking needs, but a money market account is better for savings.
- Do rich people use money market accounts?
- Yes, for example, Warren Buffett, one of the richest men in the world, has a portfolio full of money market accounts. Rich people leave their money in cash and cash equivalents, and they write checks on their zero-balance account.
- Who pays the most for a money market account?
- Though terms may vary, here are some financial institutions with above-average APYs on their money market accounts:
- VirtualBank
- Ally Bank
- Capital One
- CIT Bank
- UFB Direct
- Barclays
- First Capital Bank
- US Bank
- Sallie Mae
- Quontic Bank
- Connexus Credit Union
- Though terms may vary, here are some financial institutions with above-average APYs on their money market accounts:
*Any savings on interest will vary depending on account usage and payment behavior.
