Money market account or fund: which is which

These two products sound identical and are often confused. They serve similar purposes (holding cash you want to earn interest on) but they're structured completely differently.

Money market account (MMA)

A type of savings account at a bank. FDIC-insured up to $250,000. Often pays a competitive rate, sometimes with check-writing privileges. Your principal is guaranteed safe.

Money market fund (MMF)

An investment fund (a type of mutual fund) that holds very short-term, very safe debt: Treasury bills, high-grade commercial paper. NOT FDIC-insured. Held at a brokerage, not a bank. Generally considered very safe (major MMFs have rarely 'broken the buck' or lost principal), but it's an investment, not a deposit.

SIPC is not deposit insurance either

Because a money market fund sits at a brokerage, people often assume SIPC coverage fills the gap that FDIC insurance leaves. It does not, and the difference is the part worth remembering. SIPC protects you if the brokerage itself fails and your assets go missing: it works to restore the securities and cash that should have been in your account. It says nothing about what those holdings are worth. If a fund you own falls in value, that is an investment outcome, and no SIPC protection applies to it. FDIC insurance on a bank deposit guarantees the balance. SIPC guarantees that your holdings come back to you, not that they come back worth what you paid.

Why the yield moves as fast as the Fed does

A money market fund holds very short-term paper, often maturing in days or weeks. As each piece matures, the fund replaces it at whatever short-term rates are paying that day, so the whole portfolio reprices over weeks rather than years. That is why these funds pass a change in short-term rates through almost immediately, in both directions: the yield stays high while the Federal Reserve holds rates high, and it falls quickly once cuts begin. A bank sets a deposit rate as a business decision and can leave it where it likes. A money market fund yield is closer to a mechanical reflection of what short-term paper is paying right now.

When to use which

• MMA: for emergency funds and money you want bank-level guarantees on
• MMF: for cash sitting in your brokerage account between investments, often pays better than a HYSA

What this lesson is NOT

The account and the fund share a name but are different products: the money market account is a bank deposit with FDIC insurance, while the money market fund is an investment that is not FDIC-insured. This lesson is how to tell them apart, not a pick of one over the other.