Investing can be tricky and intimidating. You may even have some money that you would like to invest, but you are not sure where you want to invest it. Naturally, you want to get the best return on your investment, but you are also worried about the possible risk. There are many possible options for investing your money, but you may consider using a money market savings account.
Advantages
One of the biggest advantages to a money market savings account is that it comes with the same security that a traditional bank account has. Money market savings accounts are insured by the government just like your regular bank account would be. Unlike money market mutual funds (another type of money market investment) and other kinds of investments such as stocks, money market savings accounts do not have the risk of declining in value. You also have relatively easy access to your money since you’re allowed to write checks or make cash withdrawals. The interest rates vary on money market savings account more frequently than with a traditional savings account, so you can be sure you will have more opportunities to get the best rate available.
Disadvantages
There are a few disadvantages to using money market savings accounts. The greater the risk you take when investing, the greater the possible return; this means that money market savings accounts will probably have a much lower rate of return than stocks or even money market mutual funds. If inflation is running high, the returns you gain from your money market savings account may not keep up with it.
Although money market accounts allow you to access your money, there may be limits on how many times you can do so within a specified period of time. For example, you may only be able to write three checks per month or perform two cash withdrawals per month. Traditional savings accounts allow greater access to your money.
So, are they worth it?
All forms of investment have advantages and disadvantages. It is important to consider a variety of factors such as how much money you have to invest, your age (younger people can afford to take more risk than older people preparing for retirement), the level of risk you are willing to take, and what your overall goals are. A money market savings account may be the best solution to get your feet wet in your investing.
