Money Market Accounts vs. Money Market Mutual Funds

Learn about the differences between money market funds and FDIC-insured money market accounts

A money market investment falls under a segment of the financial market where investment opportunities have high liquidity and short maturity. Money market accounts and money market mutual funds are different types of investments in the money market category. They are generally less risky than other investments like the stock market and provide higher rewards than basic savings accounts.

A money market account is a type of savings account with a minimum balance requirement and higher interest rate. Offered by financial institutions for accelerated savings, money market accounts carry transaction limits and check writing restrictions. However, they offer more liquidity than a certificate of deposit.

On the other hand, money market mutual funds are open-ended mutual funds that invest in short-term debt securities (generally maturing in 13 months or less). They do not carry FDIC insurance as they are a collection of short term debt investments held by a specific mutual fund. However, money market funds are regulated by the Securities Exchange Committee (SEC) for quality, maturity and diversity of investments. The main difference between money market accounts and traditional mutual funds is that mutual funds are an investment in a security rather than a type of savings account.

Accelerate your savings with attractive money market interest rates

Money market accounts are an FDIC insured, high-yield savings account, designed to grow your money. Whether you're saving for a wedding, family vacation or a new car, a money market account can help you reach your goal sooner. Certificates of deposit offer a similar growth structure, but you cannot access your funds until they reach maturity. A money market account will also earn a greater rate of return over a standard savings account. Consider higher money market rates designed to help you maximize your investments while providing you with access when you need it.

Weigh the risks and rewards when investing in money market funds

Money market mutual funds are not FDIC insured. This means if anything were to happen to your investment, you wouldn't be able to receive compensation for your loss, making them riskier than money market accounts. Before making any investment decisions it's important to have a basic understanding of U.S. Treasury Bills, commercial paper, bankers' acceptances and CDs. You should also know that most brokers will charge fees associated with maintaining your money market funds. These annual fees will vary based on account and broker.

All things considered, money market mutual funds are a relatively safe investment compared to the volatility of the stock market. While money market funds are not FDIC insured, the SEC has imposed regulations to help protect you, the buyer. For example, the average maturity of money market mutual fund investments must be less than 90 days in order to limit risk to the investor.

Although not as secure as money market savings accounts, money market funds have many benefits. As one of the safest financial investments available to the general public, they offer liquidity and therefore serve as a good place to save cash when you want to earn more interest. Money market funds also make transferring assets between funds a relatively easy transaction.

Types of money market mutual funds

There are several types of money market funds available, and they are classified by the type of debt security they purchase. A diverse portfolio generally contains several of each type of fund.

  • Government money funds invest in U.S. government and agency securities, government-sponsored enterprises (GSEs) and U.S. treasury securities.
  • Corporate funds invest in money market securities issued by businesses.
  • Tax-free money market funds invest in securities issued by municipalities.

Open money market accounts with Citizens Bank

For a low-risk investment, consider high yield money market accounts from Citizens Bank. Money market accounts and money market mutual funds are relatively safe investments that will help you accelerate your savings program. They also provide increased liquidity through limited transactions and check writing abilities. Speak to one of our representatives at 1-877-360-2472 for more information on opening a money market account.


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