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Belco's Online Banking

Are Money Market Accounts Safe?

access_time Posted on: September 26th, 2023

Opening a money market account (MMA) might seem a bit daunting, especially when headlines warn of market instability. But even in the face of economic unpredictability, these specialized accounts offer a secure option to park your cash while earning interest.

Read on to learn how money market accounts work and why they make sense for Pennsylvania residents looking to grow their savings.

What Is a Money Market Account? 

An MMA is a type of deposit account that often requires a higher minimum balance to maintain compared to regular savings accounts. It offers the dual benefit of better interest rates while providing easy access to your funds. You’ll enjoy the ideal blend of a savings and checking account, offering a safe haven for your money while earning returns.

Money Market Accounts vs. Money Market Funds

While their names might seem similar, money market accounts and money market funds are fundamentally different in terms of risk and function. 

MMAs are insured by the National Credit Union Administration (when held at a credit union) or the Federal Deposit Insurance Corporation (when held at a bank) for up to $250,000 per depositor, per account ownership category, just like regular savings accounts. This federal insurance guarantees you will not lose your principal even if the financial institution fails.

Conversely, a money market fund is a type of mutual fund that invests in highly liquid, short-term securities such as government bonds and commercial paper. These are not insured by the federal government and come with a level of risk, since the fund’s value can fluctuate based on the performance of the underlying investments. 

While money market funds have the potential for higher returns, they don’t offer the same security and peace of mind as money market accounts. Therefore, it’s crucial to understand these differences when considering your options for storing and growing your savings.

Why Open a Money Market Account?

Opening a money market account can be a strategic move for many savers. Unlike traditional savings accounts, MMAs often yield a higher rate of return. This lets your money work harder and grow faster.

Another crucial advantage is their accessibility. Unlike more rigid investment options, these particular accounts come with the convenience of check-writing and debit card use. Your funds are always within reach when needed, making it an appealing blend of savings growth and financial flexibility.

MMAs also provide stability by limiting your risk exposure. The fixed interest rate may be lower than stock and bond returns, but you avoid the market’s volatility. This makes them an intelligent place to house your rainy-day funds.

How Much to Keep in a Money Market Account

As a general rule of thumb, keeping three to six months of living expenses in your MMA is wise. This amount provides a safety net and peace of mind to handle unexpected life events.

Beyond emergency savings, a money market account provides a safe place for other short-term savings goals. For example, you can grow a home down payment, build a vacation fund, or save for predictable expenses like property taxes and insurance premiums.

Deciding If a Money Market Account Is Right for You

Money market accounts offer more flexibility than certificates of deposit but less yield potential than investing in the stock market. They’re an excellent option for those who want a low-risk savings vehicle with the ability to earn higher interest than traditional savings accounts.

Consider your financial goals and lifestyle before opening an MMA. Factors such as your risk tolerance, time horizon, and savings goals will ultimately determine if it’s the ideal place for your hard-earned cash. 

Choosing a Local Pennsylvania Financial Institution

With a minimum deposit of just $250, you can start your money market account journey at Belco Community Credit Union. There are no maintenance or annual fees and you’ll enjoy 24/7 account accessibility—whether through online banking, our mobile app, ATMs, or at one of our various branches.

We structure our MMAs to automatically adjust rates based on your account balance, with dividends compounded and credited monthly. You can also take advantage of automatic transfers, ensuring ease of money management. 

Belco Community Credit Union is committed to fostering the financial well-being of Pennsylvania residents. We contribute to financial literacy initiatives and collaborate with local nonprofits to enhance community development. 

When you open a money market account with us, you’ll get personalized customer service with a team eager to help you make wise financial decisions.

Open Your Money Market Account Today 

Like any financial product, money market accounts have their pros and cons. However, they remain one of the safest places to put your hard-earned cash. Contact Belco Community Credit Union today to get started.

If an MMA isn’t right for you, consider opening a Certificate Account. Click below to learn how easy it is to get started.

How to Open a Certificate Account in 6 Steps

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