· Listen
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.
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.
Quick check on this lesson
Answer each question and we’ll show you why the right answer is right, and why the others aren’t.
- 1.
What is a money market ACCOUNT (MMA)?
- 2.
What is a money market FUND (MMF), and how does its insurance differ from an MMA?
- 3.
Per the lesson's 'When to use which' list, what's the best use of an MMA vs an MMF?
- 4.
How does the lesson describe the historical safety of money market funds?
- 5.
Per the warning callout, what should you check about your brokerage's 'cash sweep' feature?
0 of 5 answered