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How to Get the Best Money Market Returns

Growing wealth can be a challenge, especially when it comes to choosing the right kind of accounts for stashing your savings. Money markets offer some distinct advantages, but those advantages may not be entirely relevant if you want to maximize your returns.

What a Money Market Account Is and Isn't

Money market accounts are savings accounts, not brokerage or investment accounts. Even as part of an individual retirement account (IRA), money market accounts provide stable but relatively very low rates of return. Interest rates for money market accounts can be higher than that of a traditional savings account, though often not by much. Money market accounts are also structured with a checking component, allowing the account holder to write up to six checks a month from the account. So, if you're looking for a flexible place to keep some liquid assets, a money market account may be a good choice for you.

Finding the Highest Interest Rate

The key to getting the best money market returns is to find a bank that offers high interest rates. You can do your research for this in several ways, either by looking at rates for financial institutions yourself or by using media sources to determine which banks offer the best rates. One thing that you should do no matter which way you go about finding the account? Check the terms. Some institutions offer high yield money market rates for a limited time, then draw them back down. Try to look for a guaranteed rate period of a year if possible.

Getting the Highest Returns

Another important part of making sure you get consistently high money market yields from interest is to avoid making withdrawals. The higher your balance, the more interest you'll earn. Even though you can write checks from your account, you should avoid doing this except in case of an emergency. Because interest rates are so relatively low for money market accounts, you'll want to keep as much of your account intact as possible and let the interest compound without making withdrawals or spending.

Finding the Right Money Market Account

Many different financial institutions offer money market accounts, including all-online banks and credit unions. An institution that offers online banking and doesn't have any physical branches in your area may be another option for taking advantage of high interest rates. If you aren't comfortable with the idea of an all-online bank or you want to make sure you can keep all your bank accounts together in the same institution, you might want to incorporate that into your decision.

Is a Money Market Account Right for You?

If your ultimate goal is to earn the highest interest rate possible, a money market account probably isn't the right choice in the long term. It may be a smart short-term solution as you build up enough savings to open a brokerage account, for example, but money market accounts don't offer the potential to earn a lot of interest. Also, if you don't plan on writing any checks and can find a higher interest rate from a traditional savings account, you may want to go that route instead of choosing the money market account.