When it comes to planning for your long-term savings, there are a lot of options that you can consider and a lot of strategies that you can implement in order to build your savings and get the long-term security you have been looking for. When it comes to long-term savings options, many people are faced with two potential solutions: money market accounts (MMA) and regular savings accounts. Each of these savings accounts has their own unique benefits and some potential drawbacks. As an educated saver, the best thing you can do is to educate yourself on these two options and the differences between each type of account so you can make a smart decision on what savings solution works best for you.
Money Market Accounts
Money market accounts are a type of savings product, but one of the major differences between these accounts and traditional savings accounts is that they may require more upfront funds. Typically, you will need a higher opening deposit and need to maintain a higher minimum balance with a money market account than you would with a traditional savings account. While that may be a deterrent for some, these accounts do have their benefits. Typically, the bank will pay a higher interest rate on money in a MMA account than they would in a traditional savings account.
Traditional Savings Account
A traditional savings account may not have as high of an earning potential as a money market account, but standard savings accounts do have their benefits. These accounts typically require a lower opening deposit and have a lower monthly minimum balance requirement. While money market accounts may offer checks, traditional savings accounts typically do not. However, thanks to the influx of online and non-traditional banking programs, there are many traditional savings accounts that are now becoming less and less traditional. If you do your research you will find that these accounts are now coming with more features than ever, higher interest rates and fewer restrictions than they may have had in the past.
When it comes to choosing between a MMA and a traditional savings account, one of the biggest questions you need to ask yourself is: how much money do I have to deposit and how much am I expecting to earn?
What you are planning on saving for may also have an impact on what type of savings account you choose. Saving for college or another long-term goal is typically all about earning as much as possible over a long period of time. In these situations, you may look for MMA accounts that have high interest rates and benefits for those that don’t touch the money over a long period of time. However, if you are starting to slowly build a savings account for say a new car down payment in a few years, a standard savings account may best fit your needs.
Usually, if you have more money to put in upfront and are looking to earn higher-interest rates than a money market account is the right option. However, if you don’t have a large amount to invest as your initial deposit and are looking to build savings over time in an account that you can access money from, than a traditional savings account may be the product you are looking for. The best way to make a final decision on either one of these accounts is to do your research with several different banks and look at the different APY percentages available for each product, along with the individual restrictions to see which option best fits your needs.