Money Market Account vs. Savings Account: Which Is Better for You?

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Money Market Account vs Savings Account

Choosing the right account to save your money can make it easier to reach your financial goals. Two popular options are money market and savings accounts. Both accounts offer a secure means to save money and earn interest from it. But the features, accessibility options, and potential returns may vary. Read on to get more details on a money market account vs. a savings account to choose an option that aligns with your financial needs.

What is a money market account?

A money market account has the characteristics of both a traditional savings account and a checking account. Account holders can deposit money in the account and earn interest from it. The account also allows users to withdraw funds at any time they wish. Money market accounts pay higher interest than traditional savings accounts. The Federal Deposit Insurance Corp. (FDIC) insures money market accounts.

When should you open a money market account?

You can open a money market account if you want to save money but also make it accessible when you need it. This type of bank account is also worth considering if you prefer higher returns as the interest paid is usually higher than a traditional savings account. You can also store excess cash that you don’t need for immediate expenses in a money market account. You can earn interest on the money until you’re ready to invest or use it elsewhere.

Advantages of a money market account

The features that make a money market account attractive include:

  • Higher annual percentage yield (APY) than traditional savings accounts
  • Accounts are FDIC insured 
  • High level of liquidity
  • Low-risk accounts
  • Check-writing capabilities

Disadvantages of a money market account

Money market accounts may not always be suitable — here are potential drawbacks of money market accounts:

What is a savings account?

Just like the money market fund, a savings account allows users to deposit money and earn interest. You can make unlimited deposits into the account, but depending on the institution withdrawals from this account may be limited. You don’t need a lot of money to open a savings account. Savings accounts are safe and secure, so you don’t have to worry about losing your money. The accounts are also insured by the FDIC.

When should you open a savings account?

A savings account can be a good option if you plan to set aside money for unexpected expenses like medical bills and car repairs. You can also open a savings account when you have short-term goals like saving for a vacation or a down payment for a home. Savings accounts are especially useful if you have an irregular income, as you can deposit a portion of your income for future use.

Advantages of a savings account

Below are the benefits of opening a savings account:

  • Easy to open
  • Earn interest on savings
  • Account is FDIC insured
  • Low initial deposit
  • High level of liquidity

Disadvantages of a savings account

Consider these limitations before opening a savings account:

  • Lower interest than money market accounts
  • Possible minimum balance requirements
  • Interest can fluctuate 

Money market account vs. savings account: how to choose?

Before making a decision, you need to consider various factors depending on your specific needs. Here are tips to help you choose between a savings account and a money market account.

1. Your financial goals

If your savings goal is to build an emergency fund or save for short-term objectives, a savings account can be a good option. It is a low-risk account that can gradually grow your savings and earn interest on your deposits. A money market account could be a viable option if you can meet any minimum balance requirements and would like to earn a competitive percentage yield. 

2. Interest rates and fees

Money market accounts feature high-interest rates compared to savings accounts, but the fees may also be higher. These fees can include monthly maintenance fees. Savings accounts, on the other hand, typically offer lower interest rates compared to money market accounts. But savings accounts tend to have lower fees or even no fees at all.

3. Accessibility and liquidity

Both accounts offer a high level of liquidity, meaning you should be able to easily withdraw your funds when necessary. Your funds are accessible when you need them. 

4. Minimum balance and account limitation

Money market accounts typically require a higher minimum balance compared to savings accounts. But savings accounts often have lower or no minimum balance requirements. Both account types used to have limitations on the number of transactions you can make within a given period, though the federal regulation has now been lifted. Your bank may still have a limit on the number of transactions allowed per month.

Understanding your options

Both money market accounts and savings accounts provide the opportunity to earn interest on your savings. You should consider factors such as the risk level and interest rates associated with each account. You should also think of how easy it is to withdraw money and the minimum balance requirements. Ultimately, the choice you make depends on what matters most to you.

MoneyLion offers a convenient marketplace to compare high-yield savings accounts from our trusted partners that could help grow your money.


Does a money market or a savings account offer higher interest rates?

Money market accounts tend to have higher interest rates. The rates can change over time depending on market conditions and the policies of the institution.

Are both money market and savings accounts FDIC-insured?

Both money market and savings accounts are FDIC-insured in the United States. Deposits are insured up to $250,000 per depositor..

Do money market and savings accounts earn compounded interest?

Money market accounts and savings accounts earn interest that compounds. The interest you earn is added to your account balance, and future interest calculations are based on the new total.

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