I’ll start with a disclaimer. This isn’t one of those articles that tells you to save money by packing your lunch or giving up your daily latte. We’ve all heard that advice again and again (and again). Those tips work. But if you’re looking for one simple, painless way to make your money work harder and save more this year, read on.
Grow your money faster with a money market account
Even if you’ve been killing it in the saving department, you might not be earning as much interest as you possibly can. With a traditional savings account, you could be earning just pennies in interest each month. If there was a simple way to earn more, wouldn’t you want to do it?
If you want to earn more interest, look into opening a money market account—it’s like a traditional savings account, but better.
What’s a money market account and what makes it different?
According to the Consumer Financial Protection Bureau (CFPB), a money market account (also known as a money market deposit account) is a type of savings account that pays a specific amount of interest and is offered by banks and credit unions. 1
A money market account generally offers a higher interest rate than a regular savings account. Plus, you can often write checks and make bill payments with a money market account, which you can’t do with a regular savings account. Note: There’s often a limit to how many times you can withdraw money from or make deposits into a money market account within a given month.
How to open a money market account
Money market accounts are easy to open, and many have low minimum amounts. You could start with just $5 or $10! You can open an account at your local bank or credit union, or through on online bank. Online banks may offer higher rates because they don’t have the expense of maintaining brick and mortar locations.
If you’re already saving in a traditional savings account, consider transferring some of those funds into a money market account and setting up automatic deposits from your paycheck. That way, you’ll be putting money away before you even have a chance to miss it.
A money market account is great for funds you don’t need access to every day—like if you’re saving for an emergency fund, a new car, or if you’re making a plan to pay for college.
Things to consider about a money market account
- They usually limit the number of withdrawals and transfers you can make each month. But hey, the whole point was to save more, right?
- If you’re using an online bank, with no branch locations or ATMs, consider how you’ll withdraw cash. Some online banks have networks of ATMs you can use; if not, you may need to have another bank account you can transfer the money to.
- Make sure your money market account is FDIC-insured. This means that your bank participates in the Federal Deposit Insurance Corporation program. Most accounts insure up to $250,000. If you’re able to save more than that (you rock star, you), split up your savings among multiple accounts.
Make good on your financial resolution
A money market account won’t help you get rich. But it’s a simple way to save more money this year—and every little bit helps, especially if you’re just starting out.