What is a Money Market?

Money markets are a great place to put you money. It doesn’t matter if you are saving for emergencies, or saving for the short-term, investing in money funds is a safe thing to do. These short-term investments, will offer interest rates double what your bank savings or CD’s will.

When you choose to invest in money markets, you will receive many of the same benefits as CD’s (certificates of deposit), with the features of a checking account. A money market is much like a mutual fund, which will keep its share price at a constant rate. The funds which are deposited in a money market, are invested in government T-bills, savings bonds, and certificates of deposits to name a few. The income from these investments is then paid out to the owners of the money market.

With money market funds you will have two types to choose from. One is taxable and the other is non-taxable. If you purchase taxable funds, any returns that you earn will be taxed both in local, state, and federal taxes.

Tax-free funds are invested in short-term debit obligations, and usually will return a lower yield.

Money market funds are secure even though the FDIC does not insure them. They are a safe investment because they are much like t-bills. Because the government has the power to raise taxes to pay its bills, you investment is considered vary safe. It is next to impossible to loose your original investment.

If you wish to invest in money markets, you should be able to open an account at most financial institutions. As a rule, investors will receive a checkbook in which they will have the option to withdraw funds from their account.