Where to Put Your Savings

When it comes to saving money, it helps to know the key differences between two popular products: High-yield savings accounts and money market accounts. Both have their pros and cons, so let’s take a look.

Risk

High-yield savings accounts are generally less risky than money market accounts. That’s because the money in savings accounts is protected by the FDIC (up to $250,000). Money market accounts, while also pretty safe, are mutual fund investments. They’re not bank accounts, so they aren’t backed by the FDIC. Money market accounts do have Securities Investor Protection Corp. protection, which insures funds up to $ 500.00 if the brokerage fails.

Returns

Historically, high-yield savings accounts usually offer a slightly lower return than money market accounts. However, lately they’ve been closer to money markets than in the past. Money markets usually offer returns of around 5.4 percent. And currently, there are many savings accounts — almost all at credit unions and online banks — out there offering a return of 5.25 percent or higher. In fact, one credit union just hit 5.33 percent.

Deposit

One of the big separators with high-yield accounts and money market accounts is the minimum deposit. With savings accounts, the minimum is usually quite low. Meanwhile, the minimum for a money market account is $1,000 or more.

Bottom Line

Before you open a high yield savings account or a money market account, consider your financial situation. Do what fits you and your needs best while also providing the greatest value.