Contrary to its name, a money market account (MMA) is not a secret financial weapon sold on Wall Street. It is more like a banking middle child — more sophisticated than a checking account, a bit more upscale than a savings account, but still lives at home.
So therefore, if you thought the MMA would make you rich overnight — don’t. The obvious ways to creating wealth still remain: budgeting like an adult, paying off debt, and investing. Now, with the secret motive out of the way — let’s rewind one more time.
Wait… What is a Money Market Account?
Think of a checking account that allows easy spending, a savings account that earns you interest and limits spending, and a money market account? A strange hybrid of both!
You can get your interest and still write checks or use a debit card for spending, although you have generally limited transactions to six per month, hence it is not to be used for daily spending… like at Starbucks.
Why Are Those Accounts in Existence?
Money market accounts arrived in 1982, and the bank regulations required minimum balances of $2,500 on average. So historically, these types of accounts were meant for people not living paycheck to paycheck.
Banks handle MMAs differently nowadays:
- Some banks still have a minimum balance
- Some banks have tiered interest rates
- Some online financial institutions have eliminated minimums, but reduced interest rates as well
So, depending on the bank, it could be a great deal… or just mediocre.
Do MMAs Pay More Interest Than Regular Savings?
Sometimes — especially if you are at the traditional brick-and-mortar banks. Money market accounts are based on the short-term market lending rates, and fluctuate accordingly and therefore can pay more interest than standard savings accounts.
But here’s the basic reality:
- You are not making life-changing money on interest.
- You are making “lunch money once a month.”
Most wealthy people wouldn’t bat an eye if they looked at their earnings from interest accounts; because minutes or hours in the market creates true financial growth, not by depositing into bank accounts.
Should You Open One?
That depends on your behavior with your money. If you tend to spend every dollar that touches your checking account, then a MMA may be just the place to hide your emergency fund. You will benefit from:
- more access than a CD
- more discipline than a checking account
- liquidity when you find yourself with a flat tire, a broken laptop, or an unexpected vet bill
The sweet spot for your emergency fund is $10K-$15K (or whatever you need to sleep at night).
At that amount, the interest will start to look somewhat interesting—maybe five or ten bucks a month. Not crazy, but better than nothing.
Where Can You Get One?
Basically, everywhere:
- Credit unions
- Big banks
- Small local banks
- Online-only banks
Just don’t assume they all work the same. Each bank has their own fine print, quirks, and transaction rules.
Pro tip: always see if there are:
- minimum balance requirements
- transaction fees
- interest tiers
Some banks make MMAs a great option. Others make them annoying.
A superior interest account won’t substitute:
- Paying down debt
- Consistent investment
- Financial planning
A money market account is a storage vehicle, and not a wealth-building vehicle.
So, don’t waste time comparing interest rates like it’s a life-changing outcome. Choose something reasonable that fits your habits and move on to larger financial decisions.
So, do you have a money market account? Do you use it as an emergency fund, a savings vehicle, or you opened it simply because someone at the bank told you to?
