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Financial emergencies can happen at any time, making having a savings account critical.
If you’re just starting out, the first thing you need to do is choose an account type. Both money market accounts and savings accounts allow you to save money, but they work differently.
To help you choose the best account for your needs, we compared money market vs. savings account features.
In this guide, you’ll get answers to these questions:
A money market account is a deposit account offering higher rates than a traditional savings account. Once you make your initial deposit, you can add money at any time, making it easier to grow your balance. You also earn interest on your deposits.
Money market accounts work like other types of bank accounts. You can deposit cash, checks, transfer funds from checking or take advantage of other deposit methods. You also get a debit card or check-writing privileges, allowing you to access your funds quickly. Note that some money market accounts have withdrawal limits. If you exceed the limit, you may have to pay a fee.
Generally, money market accounts are ideal for individuals with short-term savings goals.
Your financial institution may offer a standard money market account or a high-yield money market account. A high-yield money market account has a higher annual percentage yield (APY) than a standard account. This enables you to earn more interest on your balance.
Currently, the average APY for standard money market accounts is 0.66%, according to the FDIC. Several banks offer high-yield money market accounts with APYs of 4% or higher including U.S. Bank, Quontic and EverBank.
The table below lists some pros and cons of money market accounts.
High-yield money market account:
Why we like it
Key Select Money Market Savings® Account is a great option for those seeking convenient banking and can maintain a minimum balance of $25,000 at all times. By keeping a balance of $25,000 to $1,999,999.99 and bringing at least $25,000 from outside of KeyBank, you can earn a 4.00%-4.50%* interest rate for six months.
An overview
| APY | Minimum deposit | Monthly fee |
|---|---|---|
| 4.00-4.50%* (2.41%-2.92% blended APY) | $5,000 | $20, waived with a daily $25,000+ balance or KeyBank consumer relationship package checking |
*Figures are dependent on location and are accurate as of June 2024.
A traditional savings account is a deposit account designed to hold funds you don’t need right away. For example, if you want to save up for a new car, you can deposit money in a savings account every month until you have enough for a down payment.
Savings accounts are ideal for consumers who want to grow their savings without taking big risks. Opening a savings account is also a great way to change your spending habits. If you set aside money in a separate account, you may be less likely to spend it when you’re out shopping or browsing the web.
Using our savings calculator can help you see how your money could grow over time in a savings account.
Savings accounts work by making deposits as often as you like into an account which will then earn interest. Some people take cash to a local bank branch, while others transfer funds from their checking accounts. You may even be able to set up automatic transfers from your paycheck.
When you want to withdraw funds, you can go to a local branch, transfer money to another account or use your ATM card to get cash.
In 2020, the Federal Reserve Board revoked the rule requiring banks to charge a fee for more than six savings account withdrawals per month. However, some banks still have limits on the number of fee-free withdrawals you can make each month, so review the terms of your account carefully.
A high-yield savings account has a much higher APY than a standard savings account. The national average savings APY was just 0.46%, according to the FDIC. In contrast, the best rates for high-yield savings accounts range from 4.25% at Capital One to 5.24% at Western Alliance.
Savings accounts have a few advantages and disadvantages you should know about.
The table below compares the features of a standard or high-yield savings account vs. a money market account:
| Minimum deposit | Some banks have minimum deposit requirements. | Some banks have minimum deposit requirements. |
|---|---|---|
| Minimum balance | You may be required to maintain a minimum balance. | You may be required to maintain a minimum balance. |
| Earns interest | Earns interest at a variable rate that’s usually higher than the rate on a standard savings account | Earns interest at a variable rate that’s usually lower than the rate on a money market account |
| Transfers and withdrawals | Limit of six transfers per month at some banks | Limit of six transfers per month at some banks |
| FDIC insured | Insured for up to $250,000 per depositor, per bank | Insured for up to $250,000 per depositor, per bank |
| Debit cards | Yes | No; some banks offer ATM cards |
| Check-writing | Yes | No |
When comparing money market account vs. savings account features, you’ll notice a few similarities:
When you compare money market vs. savings accounts, you also need to be aware of the differences:
Before you open a savings account or a money market account, consider the following:
You should get a money market when you have enough cash on hand to meet the minimum deposit requirement. A money market account may be right for you if you’re concerned about accessing your funds. This type of account allows you to write checks or use a debit card, enhancing accessibility.
You should get a savings account as soon as you have enough money to meet the minimum deposit requirement at your preferred bank. If your bank doesn’t have a minimum deposit requirement, you can open a savings account at any time — the earlier, the better.
To open a money market or savings account, follow these steps:
Choose a bank.
Review the account terms carefully.
Fill out the application. You may be required to provide ID and proof of residence.
Make your initial deposit.
Add funds whenever you can.
One account isn’t better than the other. Both types of accounts have features designed to help you save money.
Money market accounts are similar to savings accounts, but they’re not exactly the same.
A money market account may have a high minimum deposit requirement. Some banks also charge fees for more than six withdrawals per month.
Yes, interest is treated as income, therefore you have to pay taxes on savings account interest earnings.
Money markets are just as safe as traditional savings accounts. Both are insured by the FDIC to give you extra peace of mind.
Yes. Each account is insured for up to $250,000 per depositor, per bank.
Yes. Money markets usually have higher rates than traditional savings accounts. You’ll earn even more if you open a high-yield money market account, which comes with a higher-than-average APY.
Elizabeth Smith is an experienced travel and finance writer who specializes in topics including credit cards, travel insurance, and personal finance. Travel insurance, in particular, has both professional and personal significance for Smith. She’s traveled to 73 countries, and has extensive experience choosing and using various policies — she understands how valuable the right plan can be in an emergency, and loves to help readers find the perfect fit.
Smith comes to the world of finance from a scientific and technical background. She spent more than 10 years writing about engineering, science, and technology for universities and private companies. When she’s not writing or traveling, Smith can usually be found hiking or Nordic skiing.
