What is the best reason to use a money market savings account over a certificate of deposit if you need to access your money in the next two months? (2024)

What is the best reason to use a money market savings account over a certificate of deposit if you need to access your money in the next two months?

Explanation: The BEST reason to use a money market savings account over a certificate of deposit if you need to access your money in the next two months is that a money market account allows easier access to your money.

What is the difference between a money market account and a certificate of deposit?

With a CD, your money is locked away for a set time, such as 12 months. Money market accounts are more accessible, allowing you to withdraw money when needed.

What is the advantage of a money market account over a savings account?

Key takeaways

Advantages of money market accounts often include high yields, liquidity and federal insurance for your funds. They may come with the ability to pay bills, write checks and make debit card purchases.

What advantage do savings accounts have over certificates of deposit?

With a savings account, you'll have easy access to your money and earn a little interest on the balance. A CD typically pays more interest, but access to your money is limited.

Why would you want a money market over CD?

Money market accounts provide access to funds and offer interest rates similar to regular savings accounts. CDs earn more interest over time but have restricted access to funds until maturity. Money market accounts are a better option when you need to withdraw cash.

Which is an advantage of a money market account over a savings account quizlet?

A money market account is an interest-bearing savings account that offers a higher-yield interest rate, allowing you to earn faster than a traditional savings account.

Are certificate of deposit accounts good?

For some people, it can be worth putting money into a CD. If a person is seeking a riskless investment with a modest return, CDs are a good bet—you'll earn a higher rate than you would with a checking or savings account, but you'll have to commit your funds for a fixed period.

Which is safer CD or money market account?

Both money market funds and CDs are relatively safe investments, delivering an income stream in the form of interest or dividends. Money market funds are generally more liquid than bank or brokered CDs.

What is the downside of a money market account?

Money market accounts are savings accounts that often offer higher interest rates than regular savings accounts and often incorporate checking account features, like easy access to cash. Yet they can also have downsides: Many have minimum balance requirements and excessive fees.

Should I use a money market instead of a savings account?

Savings accounts generally lack the minimum deposit and balance requirements many money market accounts have. However, money markets typically offer higher interest rates than regular savings accounts, letting you earn more on your saved money.

Why would you use a money market account?

If you want to maximize how much interest you earn on your savings, a money market account can be a good option compared to other savings accounts because it usually earns a higher rate of interest. Plus, if you need quick access to your money, you can do so in a variety of ways.

Can a money market account lose money?

Money market accounts are considered safe, low-risk investments. They earn interest and allow for easy access to your money. Your balance is also FDIC-insured, so it's unlikely that you'll lose money. However, fees and interest rate changes could deplete your returns.

Are CDs safe if the market crashes?

Yes, CDs are generally still safe even if a stock market crash occurs. CDs are a type of bank account. Many accounts offer a set rate of return for a specific timeframe that won't fluctuate.

What is the biggest negative of putting your money in a CD?

One major drawback of a CD is that account holders can't easily access their money if an unanticipated need arises. They typically have to pay a penalty for early withdrawals, which can eat up interest and can even result in the loss of principal.

How much does a $10000 CD make in a year?

Why is CD not a good financial investment?

CD rates may not be high enough to keep pace with inflation when consumer prices rise. Investing money in the stock market could generate much higher returns than CDs. CDs offer less liquidity than savings accounts, money market accounts, or checking accounts.

Why are CDs not a valuable investment?

Low overall return. Once you factor in inflation and taxes, a CD's return is relatively low compared to many other investments. Reinvestment risk. There is the risk that, after your CD matures, you won't be able to reinvest it at an equal or higher rate.

Do you pay taxes on money market accounts?

Rather than more favorable capital gains rates, you'll owe regular income taxes on money market fund earnings, with a top bracket of 37%. By comparison, the top long-term capital gains rate is 20%.

What does the rule of 72 tell us?

The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double. In this case, 18 years.

Who would benefit from a money market account?

Banks may impose a service charge if the balance falls below that minimum amount. Money market accounts are suited for individuals who want to earn more interest than they would with a savings account with short-term goals in mind.

What is one disadvantage of keeping your money in a savings account?

One important disadvantage of a savings bank account is that the interest rates offered by the bank are variable. This means that the bank has the right to make changes to the interest rate.

What is risky about a certificate of deposit?

Standard CDs are insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000, so they cannot lose money. However, some CDs that are not FDIC-insured may carry greater risk, and there may be risks that come from rising inflation or interest rates.

Is a 12 month CD worth it?

A one-year CD typically offers a higher interest rate than shorter-term CDs, such as three-month CDs and six-month CDs. Offers higher interest rates than traditional savings accounts.

Will CD rates go up in 2024?

Currently, national average rates for a 1-year CD sit at 1.86% APY, up from 0.15% APY in April 2022. But with no change to rates since December 2023, it doesn't appear rates will continue to go up, at least significantly.

What's better than money market?

A money market account gives you more access to your money in the form of direct checking and ATM withdrawals, but it will generally provide a lower interest rate. A high-yield savings account pays a much higher interest rate, but you have transfer limits and few, if any, accounts let you directly spend money.