Neil &  Company CPAs, PC

A Professional Corporation

1184 North 15th Street, Bozeman, MT 59715

 

Phone: 406-587-9239

 

November 2019

When Safe is Best

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When investment markets are volatile or declining, investors and savers flock to more predictable, less volatile instruments like money market mutual funds, bank money market accounts and bank Certificates of Deposit (CDs). But these savings and investing vehicles are not the same.


CERTIFICATES OF DEPOSIT

CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per person, may pay the highest interest rates of the three and are less liquid than money market alternatives. The longer the term, the higher the rate you’ll get in return. A CD can be a good spot to earn a few dollars for a short period of time, but beware of early withdrawal penalties.


MONEY MARKET ACCOUNT

Backed by the FDIC as CDs are, a bank money market account may offer different levels of interest rates depending on the balance you maintain. This account may restrict how many checks you can write per month, and it usually pays a lower rate than savings accounts in exchange for more flexibility. This can be a good parking spot for emergency funds that need quick access.


MONEY MARKET FUND

A money market mutual fund pays interest, but could have higher fees than its alternatives. No mutual fund has the benefit of the FDIC’s $250,000 guarantee per depositor, per insured bank, for each account ownership category. While mutual fund companies try to maintain money market share prices at $1 a share, they can lose principal. They may, however, allow lower minimum balances and fewer check-writing restrictions than bank money market accounts.


YOUR CHOICE

A savings account may be best for immediate access to all of your money, but if you want to earn a little more, you might consider the two money market alternatives.


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