Everyone likes to make money – and then make even more money from that money by investing it. Some people like to take more risks since they may get bigger returns – sometimes very big returns – even though they know they could lose everything. Other people like to invest their money in safer ways, like money market accounts or money market mutual funds. They make their money from the current money market rates.
A money market deposit account is a special kind of account offered by many banks and other financial institutions. It’s sort of a hybrid between a checking account and a savings account. Banks offer them because they are not allowed to offer interest on standard checking accounts. So, they created money market deposit accounts, which have a set number of transactions that can be performed every month, but also offer higher interest rates than savings accounts. A typical savings account will offer interest on your average daily balance, but it’s usually not too high.
The interest rate you’ll be getting on your money market account or fund is tied to daily, ever-fluctuating rates that are determined by a variety of interesting economic and financial factors. The money rates you’re looking at will come from a broker call loans, federal funds rate, Treasury bill rates on 3- and 6-month items, rates on bankers’ acceptances, and such exotic things as “Eurodollar time deposits.” There are many other financial indices that contribute to the creation of a money market rate, but these are just a few of the biggest players in that game.
To get the last word on making money from money market rates, be sure to sit down with a qualified financial services expert and go over everything until you feel satisfied that you know what you’re doing. After all, it’s your money and your financial future that’s at stake.