Money market accounts vs. money market funds
Two different products with almost the same name that people constantly confuse.
A common point of confusion: a 'money market account' and a 'money market fund' sound identical but are completely different products with different risks, different rates, and different places to buy them. Knowing the distinction matters if you're parking more than $10k somewhere.
Money market account (MMA)
A money market account is a type of deposit account at a bank or credit union. It's FDIC-insured up to $250k, often pays slightly higher interest than a regular savings account, and usually comes with limited check-writing or debit access. Your principal is safe — this is bank money, not market money. Rates typically hover near HYSA rates.
Money market fund (MMF)
A money market fund is an investment product — a mutual fund that invests in very short-term, very safe debt instruments (Treasury bills, commercial paper, certificates of deposit). It's not FDIC-insured. Your principal is not guaranteed, though MMFs almost always maintain a stable $1-per-share price in practice. Rates can be higher than HYSAs and MMAs, especially in high-rate environments. Bought through a brokerage account, not a bank.
The risk nobody talks about
Money market funds are almost always safe, but 'almost' is doing work. In 2008, one major money market fund 'broke the buck' — its shares fell below $1 during the financial crisis. Post-2008 reforms made this much less likely, especially for government money market funds (which only hold Treasury securities). Prime money market funds are marginally less safe than government ones. For absolute safety, Treasury-only MMFs or regular FDIC-insured accounts are the right answer.
Put this into practice
Worth tracks your accounts, budgets, and goals — so the concepts in this article aren't just theory.
Get started free