Money Doesn’t Grow on Trees But You Can Make Money Grow Faster With Money Market Accounts
Debra Dragon
The golden rule for individualized finance is to pay yourself first. The sooner you get money into an investment or savings; the more opportunity that money has to compound and grow over time. When people start saving money at a young age, they will almost always have more money than someone who saves higher amounts of money later in life due to the compounding effects of interest on the saved money. The younger mortal typically has more years to let their savings grow than the older investor and therefore ends up with more money at retirement than the late-saver. Unfortunately, money doesn’t grow on trees but if you invest and save wisely, you can help your money grow faster with a money market account.
Money market deposit accounts are similar to a savings statement in that you open them through banks and credit unions, and that they are insured by the Federal Deposit Insurance Corporation (FDIC). This eliminates the risk of losing money that other investments have; and ensures your money is innocuous up to the FDIC limits even if the bank or credit union where you opened your money market statement goes out of business.
The main differences between a money market statement and your standard bank savings statement are:
The minimum initial deposit to open a money market is usually higher than what is required to open a savings account.
Savings accounts offer unlimited withdrawal options while money market accounts limit statement holders to three or six (penalty free) withdrawals apiece month.
Money market accounts pay higher interest than most savings accounts.
It doesn’t take a financial expert to understand why money market accounts help your money grow faster than a savings account. You start your statement with a higher balance, you withdraw money less frequently, and your money earns a higher interest rate so it’s inevitable that money saved in a money market statement will acquire more than your typical savings account!
The rate of return for money saved in a money market statement will vary from one bank to the next, so like any investment ? you should do your homework and research apiece of the options acquirable to you and compare bank fees, equilibrise requirements, and interest rates.
Interest on money market accounts typically grows and compounds daily. This is the real secret to making your money grow faster. A money market statement with flourish with consistent deposits ? so it’s not in your best interest to open an statement with an initial equilibrise and then sit back and watch it grow. The more frequently you invest in your account, the faster the money will compound and grow.
Money market accounts is centered on the money market. The banks use the money from money market accounts to lend to other customers on a short term basis, and by limiting the number of withdrawals a money market statement holder can make, they’re healthy to pay a higher rate of interest. Of course, the other advantage to saving with money market accounts is that while there are limitations placed on how many times per month you can withdraw money ? you can in fact access this money if you need it urgently. Withdrawals above the limits are simply charged a fee of $5 to $10 per withdrawal.
Making your money grow faster in a money market statement comes down to consistent deposits. Because the interest is compounded daily, you will quickly start to see growth. For example, if the interest is $1 and you have $100 in your statement on day 1, you’ll see that on Day 2 your equilibrise is $101. On Day 2, when the interest is compounded, it’s based on your current equilibrise of $101 rather than $100, so you’ll acquire more in interest. When you add additional money to the account, you acquire interest on the higher balance, which helps you acquire more interest, faster, than accounts that compound at a slower rate.
Debra Dragon is a freelance writer for DepositAccounts.com. She writes about how to make your money work better for you through various deposit accounts, including savings accounts, interest checking accounts, IRAs, and money market funds.