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You are here: Home / Banking / Money Market vs. Savings Account: What’s the Difference?

Money Market vs. Savings Account: What’s the Difference?

Published: April 23, 2020 by David Em Updated: June 18, 2022
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Money market and savings accounts are two places to keep your savings. The main differences are the interest rate and how you use it.

Table of contents show
What’s a money market account?
What’s a savings account?
Money market account versus savings account
Conclusion
Coins spilling out of a glass jar.
Money market and savings accounts are options to hold your savings. Photo courtesy of Unsplash.

After you begin to save and accumulate money, make sure you put it in the right place.

Money market and savings accounts are two popular places to keep your funds.

Most banks and credit unions offer both deposit account types. Also, they’re federally insured up to $250,000 per account owner.

Related article: What does ACH stand for?

Money market and savings accounts have a lot in common, but there are several differences.

The following covers what you need to know about the two types of accounts and how to choose one for your money.

What’s a money market account?

A money market account is a deposit account that earns interest.

Most banks and credit unions offer a higher interest rate for money market accounts over other deposit accounts.

But, the higher interest rates may need larger balances.

Unlike savings accounts, money market accounts have a unique feature that allows you to write checks.

Also, you can deposit or withdraw money through an ATM or electronically.

Some financial institutions offer money market mutual funds.

A money market mutual fund differs from a money market deposit account because a brokerage will invest in financial markets.

While you get better returns, it may not be as much as you’d get from investing in the stock market.

Also, you may need a higher initial investment, and you’ll pay an expense ratio.

Money market deposit accounts are better because there’s no risk.

Also, you’ll have insurance for your money by the FDIC for banks and NCUA for credit unions.

You can deposit and withdraw funds anytime without penalties.

What’s a savings account?

A savings account is a deposit account held by a financial institution. The bank or credit union will pay you interest to keep money in the account.

Unlike the money market account, you can’t write checks from a savings account. But, you can buy a cashier’s check with it.

You can also deposit or withdraw money through an ATM or electronic transfer.

Regular savings accounts offer a better interest rate than checking accounts, but not as good as money market accounts.

There are also high-yield savings accounts that offer higher interest rates.

A high-yield savings account is the best for a higher interest rate without restrictions. You can access your money anytime.

Money market account versus savings account

You work hard for your money, and you understand the value of saving. But, how do you decide where to put the money?

Money market and savings accounts are excellent because the funds are federally-insured.

The deposit account types are similar but have differences.

The main difference is that a money market account has a check-writing feature.

Aside from checks, the two account types are almost the same.

You can deposit and withdraw funds anytime because they’re locked for a timeframe like a certificate of deposit (CD).

While a basic savings account is a safe place to keep your money, it’s not the best.

So, hold your money in a money market or high-yield savings account.

Make sure the account is insured and choose the one with the higher interest rate.

Conclusion

Money market and savings accounts are excellent places to keep your money.

Both options provide a higher annual percentage yield (APY) than a checking account and regular savings accounts.

Also, deposit accounts are federally insured.

For even better returns, consider investing. Of course, it’ll be subject to risk.

Related articles:

  • How a credit card balance transfer works
  • What is a loan?
  • The financial tips for young adults
  • The best places to cash checks

Featured image courtesy of Unsplash.

Portrait of David Em.

About David Em

Founder

David Em is the founder of More Money More Choices, which he launched to help you take control of your finances and build your dream life. Before More Money More Choices, David worked in leadership positions in the finance industry.

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