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

We all have different financial goals, and different types of accounts will help you save money for those specific intentions.

For example, many people prefer the simplicity and convenience of a standard savings account, but it doesn’t always give you the most bang for your buck. Other types of accounts, like money market accounts, offer some of the same benefits as a traditional savings account, but with a few extra perks.

In some cases, a money market account can be the better option than a savings account, especially if you’re looking for a higher interest rate or multiple ways to access your money.

What Is a Money Market Account?

A money market account is a deposit account at a bank or credit union that acts like a combination of a checking account and a savings account.

It's a type of savings account that has easier access than a typical savings account. Many money market accounts have check-writing privileges and can withdraw money at the ATM.

They tend to pay higher interest rates than savings accounts. The drawback, however, is that easy access might not be what you want when it comes to your savings. You may want it to be a bit harder to access those funds so you think twice before spending them.

They are useful for money that you are saving to spend on a large project, such as a kitchen remodel. You can save the money in a money market account, then spend it as needed on your project.

What Is a Savings Account?

A savings account is a deposit account where you can deposit money and earn interest. This is where you would typically keep your emergency fund or other money you're saving up to spend at a later date. For example, you'd put money for your next car or an upcoming vacation into a savings account.

You might get a lower interest rate than with a money market account, but high-yield savings accounts are often very competitive.

How Are Money Market Accounts and Savings Accounts Similar?

Money market accounts and savings accounts have several basic things in common. First, both a savings account and a money market account pay you to keep your money in them. These are interest-bearing deposit accounts that pay a monthly APY. Over time, the interest compounds, growing your savings.

And deposit accounts like these are important for banks to be able to provide lending services to other customers. When you put money in a savings or money market account, that money is essentially used by the lender to provide loans to other customers. In exchange, your bank compensates you by paying you interest on the money you keep in the account.

As of September 2024, the average interest rate on a savings account was 0.46%, and 0.64% on a money market account.

Insurance

Both accounts are also treated similarly by government regulations. They are both insured by the FDIC for up to $250,000 per depositor.

Withdrawal limits

Additionally, both types of accounts adhere to Regulation D, which limits the amount of withdrawals you can make per month. The Federal Reserve waived the withdrawal limit in 2020, however, some banks still only allow up to six withdrawals per month. This applies to both savings and money market accounts.

Related: Checking vs. Savings Accounts: What's the Difference?

Differences between money market accounts vs. savings accounts

Money market accounts tend to be less common than traditional savings accounts.

Interest rates

In exchange for keeping a balance in a money market account, banks often offer a higher interest rate than a traditional savings account. That being said, money market accounts don’t always provide the highest rate. Many high-yield savings accounts now offer the same — or, in some cases, better — APYs without the minimum balance requirement.

Related: Best High-Yield Savings Accounts

Access to funds

One nice feature of money market accounts is that they offer some of the same benefits as a checking account.

Customers get a debit card and often have the ability to write checks from the account, just like with a checking account. This combines the benefit of earning higher interest with easier access to your money — and the ability to spend it directly from the account, too.

On the other hand, to spend money from a savings account, you have to first transfer the money into a checking account. This makes it harder to spend money out of a savings account, which could be good or bad depending on your spending habits!

Money Market vs. Savings: Which Account Should You Choose?

When you choose between a money market account or a savings account, evaluate your needs. Both types of accounts can help you grow your savings, but have their respective trade-offs. If you’re looking for an account that you can spend from, a money market account might be a better fit. But if you can’t meet the minimum deposit requirement, a high-yield savings account might be a better option.

Do you need access to funds?

One thing to keep in mind is whether or not you will need access to your money in the short term. While you can spend money directly from a money market account, going under the minimum deposit requirement could trigger fees. This type of account might not be suited for emergencies or sudden expenses that could drastically reduce your balance.

Are you looking for maximum interest?

Another thing to consider is the APY. While money market accounts typically offer higher interest rates than traditional savings accounts, they don’t always offer the highest rate. High-yield savings accounts offer competitive rates and may be the better option for rate optimizers.

What's your timeline?

Finally, think about how long you plan to keep the money in the account. If you have enough cash and expect to need easy access, a money market account will keep your cash liquid with a better interest rate.

If you are keeping the money for long-term savings with no immediate plans to spend it, you may find that a high-yield savings account is the better option.

FAQs

Money Market vs. Savings: Is a money market account better than a savings account?

A money market account can be a better option if you want to earn more interest on your money. The national average APY for savings accounts is around 0.46%, while it's 0.64% for money market accounts.

There is usually a minimum deposit requirement to open a money market account and that can be quite high depending on the bank. A high-yield savings account is another option to consider that provides higher yields with less restrictive minimum balance requirements.

Money Market vs. Savings: Is a money market account safe?

Yes, money market accounts are safe. Just like traditional savings accounts, money market accounts are insured by the FDIC for up to $250,000 per depositor.

Interest earned by money market accounts is generated by short-term investments like bonds. These are typically considered low-risk investments as they are backed by the federal government.

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