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Intimidated by wild stock market swings? Worried about negative returns from bonds? FDIC-insured money market accounts at banks guarantee accounts up to $100,000, offer complete liquidity at any time (unlike CDs), and typically have better interest rates than savings accounts. For conservative investors and those looking to save money in a safe institution, money market accounts could be the best tool to use.
Savers and conservative investors have been using savings accounts and CDs for years, but many are now switching their retirement funds and savings accounts to money market accounts. Why?
CDs lock up investments, and most retirees can't live on the paltry savings account interest offered by most banks. In the interest of self-preservation and quality of life, retirees have become more informed about their investment options. This educational quest for more financial information is producing a rising tide of money market accounts investors.
Get a Better Rate - While financial institutions have stubbornly resisted raising the average savings account interest rate above 1%, money market accounts have offered steadily rising rates in concert with the Federal Reserve's actions in the last several months. Average money market accounts earn more than three percent interest as of early June 2006, and several high interest money market accounts offer yields in excess of 4.5%. For example, GMAC Bank from Horsham, PA advertised an account with a 4.80% APY, Domestic Bank from Cranston, RI advertised an APY of 4.9% and Corus Bank from Chicago, IL posted the top average seven-day yield of 4.91% as of 6/13/06. Although some banks can offer certificates of deposit that are comparable in yields, investors can freely access money market accounts without penalty. Why lock up your money if it's not necessary?
Access Funds Easier - Many investors also appreciate the ease using their money market accounts as financial management tools. Checks from rental properties, pensions, business interests and royalties can flow into these accounts, and be allocated with the owner's instructions without ever visiting a bank or making a phone call. Not only can payments be easily made, funds in the money market accounts can easily be withdrawn by debit card through on-line transactions and turned directly into cash at banks while traveling anywhere in the world. Financial institutions can't make these transactions any easier.
Nice to the Little Investor - Some of the more traditional banks still maintain fees for withdrawing funds below minimum balances, and a few institutions still don't want the business of small investors so they maintain minimum investment requirement. However, those traditional practices are disappearing quickly. For instance, the PayPal Money Market Fund is one of the highest yielding money market funds (4.73% as of June 7, 2006), and it does not require a minimum investment or a minimum balance. While PayPal money market accounts are not insured by the FDIC, money market fund managers have an excellent track record of maintaining the value of their the fund assets through very safe, short-term investments.
Disclaimer - The information on this site is believed to be accurate, but no warranty is made regarding rates, terms or features of any financial product. Carefully read the prospectus for any product before investing. The best money market accounts, rates and funds are determined by individual needs, and tax, financial and legal advisors should be consulted before making an investment. |
