The biggest difference between money market funds and money market accounts are risk and options. A money market account is a low risk savings account with a higher interest rate than a standard savings account. A money market fund is a lower risk investment fund, with higher risks associated than a money market account.
FDIC
From a risk standpoint, a significant difference between a money market account and a money market fund is that an account is Federal Deposit Insurance Corporation or FDIC insured (up to $100,000) and a fund is not, although in 2008, more protections were offered for money market fund shareholders.
Money Market Accounts
You can open a money market account at your bank or credit union. Since the interest is higher than the average savings plan, the minimum deposit is also higher, often at least $1,000. Typically, you are allowed between three and six withdrawals and may write three to six checks per month.
Money Market Funds
For those new to investing, a money market fund is a safer investing method. They typically invest in low risk areas like government securities, and CDs. The risks of losing money are higher due to variable return rates, the potential to lose your initial investment and inflation. To open a money market fund, you may need to seek out a broker or investment company.
Effort
Since a money market account is a savings plan, minimum effort is required. With any investment method, including a money market fund, expect to invest more time researching the market and keeping up with your account.
Access
If you are not quite ready to invest, or if access to your money is a necessity, consider a money market account.
