Money guide · Savings accounts and emergency funds
Money market account vs. money market fund
Compare money market deposit accounts and mutual funds by insurance, access, yield measures, and investment risk.
How it works
An eligible deposit account at an insured institution falls under applicable FDIC or NCUA rules. A money market fund is not FDIC-insured, and its value or access can be affected by investment and liquidity risks. Funds may seek a stable share price, but that is not the same as a federally insured deposit balance.
A worked example
Suppose a deposit quotes 4% APY and a fund displays a 4.2% seven-day yield. Those figures describe different measurement methods and should not be treated as guaranteed full-year outcomes. If each happened to deliver the respective annual percentage on $20,000, the illustrative difference would be $40, before applicable taxes and any additional charges.
What to compare
Read what the product actually is, the institution or fund provider, withdrawal and settlement timing, fees, and how the yield is reported. For a fund, review its prospectus and holdings. For a deposit, inspect minimum balances and transfer conditions. If comparing yields, confirm whether fund operating expenses are already reflected so you do not subtract them twice.
A common mistake to avoid
An app’s “cash” label can hide a bank sweep, a fund, or another arrangement. Look at the statement and account agreement instead of inferring coverage from the interface. The right comparison also includes your need for immediate cash and tolerance for a product whose risks differ from ordinary insured deposits.
Are money market funds federally insured?
They are investment funds, not FDIC-insured deposits. Check the prospectus for their objectives, risks, expenses, and liquidity terms.
Sources and further reading
Connect this to inflation
Inflation changes the spending power of money over time. Read the related inflation explainer, or compare cd growth using your own assumptions.