When it comes to investing money, there are as many different kinds of investors as there are people. Some want to take big risks, and others want to play it safe. The vast majority of people want to make money, but in a safe and secure fashion because most of us don't have a whole lot of money to begin with, and if we lost what we had we'd be in very, very bad shape. It's all well and good for a high roller to lose a few grand, make a few grand, but few people have so much money they can lose without really feeling it. Money market accounts are a great way to make money safely, because they are insured by the United States government.
The Great Depression, the devastating financial crisis of the 1920's and 30's, caused incredible suffering and hardship not just in America but all around the world. When the stock market collapsed in the Great Crash of 1929, it took thousands of banks with it. People lost every single bit of money they had. Just imagine your horror if you woke up and saw there was nothing in your checking account, nothing in your savings account because your bank had just simply gone belly up. You'd be thunderstruck and if you lost your job on top of that you'd be devastated and very, very scared about your future. As a response to the failure of the banks, the Federal Government created the FDIC the Federal Deposit Insurance Corporation. The FDIC is a bank's insurance, so should it face collapse everyone who holds their money in it would be protected up to $100,000. This coverage extends to money market accounts.
How does it work? Every bank and credit union in the nation pays a premium into the FDIC, in the same way you pay a monthly health insurance or car insurance premium. This creates a cash fund that can be used for banks that are in danger of failing, so that individual customers like you can rest easy knowing that your money will always be available to you.
For more information on the FDIC, money market accounts and other aspects of the complex world of finance, be sure to ask your financial advisor any and all questions you might have.
