Top Eight Places to Stash Cash --
Money Market Mutual Funds

4. Money Market Mutual Funds

MMMFs usually are purchased through brokerage houses. A hybrid of saving and investing, they usually require a larger initial deposit. Depending on your fund, you can also reap a higher rate of return.

Who's It For?

Just about everybody, says Douglas Borkowski, director of the Financial Counseling Clinic at Iowa State University. You get a rate of return closer to a stock-type investment without the stock-market-level risk. Because it's less liquid (and could return some decent interest), it's most effective for those needs that are a few years away, rather than the always-available emergency fund or saving for that big-screen TV you want to buy in the next few months.

That means the couple saving for a house in two or three years might be able to get a nice little dash of interest on their nest egg. And a college student who doesn't have a lot of extra cash can start putting a little away for after-college life.

Like CDs, you can also park money market mutual funds inside a tax-deferred account for retirement or college savings. And they continue to be popular with investors, as the low-risk, liquid part of a balanced financial strategy.

Pros

Check out Bankrate's all-inclusive 2006 Savings Guide. Find inspiration, the best rates and more.

Flexibility: You can be as aggressive or conservative as you want with money market mutual funds. "You can find whatever level of risk you want to take," says Douglas Borkowski, director of the Financial Counseling Clinic at Iowa State University.

Higher earnings: There is the potential for a higher rate of return than with savings or money market accounts. While the money is not federally insured (as with a savings account), you are not risking the principal in return for a shot at greater interest.

Liquid: Money is often more liquid with MMMFs than with CDs or Treasuries. You can usually get at your money within a few days.

Ease of use: You often can automate deposits.

Cons

No guarantee: You usually aren't guaranteed a specific rate of return. The interest rate you get will depend on the investments you select.

Easy access: These can be tempting for someone with no savings willpower. Because you can lay your hands on the money at any time, you could be tempted to drain the account for "wants," rather than "needs."

Opening minimums: You usually need a chunk of money to open one. Many have a minimum requirement to establish an account and many will require a minimum balance. But some institutions are becoming more competitive, hoping to catch consumers at a young age and have a customer for life. So if you want an account, keep looking.

More fees: You have to watch out for fees. There are more types of fees to watch for with an MMMF. A couple of terms to learn: load (commissions associated with transactions) and expense ratios (account management fees.) Shop for an account with a fee structure that will best suit the way you invest.

Today's Average Savings Rates
Type	Current	APR
3 Month CD	0.87%	0.87%
6 Month CD	1.19%	1.19%
1 Yr CD	1.59%	1.60%
5 Yr CD	2.62%	2.66%
1 Yr Jumbo CD	1.64%	1.65%
MMA	1.08%	1.09%
$10K MMA	1.15%	1.16%
$25K IRA MMA	1.40%	1.40%
Jumbo IRA MMA	1.50%	1.51%
Interest Checking	0.59%	0.59%

Savings Accounts Data Provided by Bankrate.com

Compare Rates in Your Area

Protection: Your money is not federally insured, and, technically, it's at risk. "Officially it's at risk, but to my knowledge, no one has ever lost anything," says Barry Picker, partner in Picker, Weinberg & Auerbach CPAs. Usually, the money is invested in short-term securities, similar to what banks do on a regular basis, he says.

Low liquidity: Money might not be instantly available. It could take a few days to retrieve your money if you need it.

Next: Certificates of Deposit

1 | 2 | 3 | 4 |5 | 6 | 7 | 8 | Banking Home

Compare Savings Products
	Cost to open	Min bal.	APY*	Insured	At risk	Investment choice	Liquidity
Passbook savings	minimal	usually none	.25 - 5.5	yes	no	no	complete
Money market acct	$1,000 - $50,000	yes	.15 - 5.6	no	no	no	liberal
Christmas /Club acct	minimal	usually 0	.5 - 5.5	yes	no	no	complete
MM mutual funds	$500 - $5,000	often	4.5 - 5.5	yes	no	yes	partial
CDs	$500 - $5,000	usually	.10 - 5.5	yes	no	no	with penalty
529 accounts	minimal	usually 0	n/a **	no	yes	yes	highly restricted
Savings bonds	approx $25	yes	EE bonds - 3.7 I-bonds - 2.41***	yes	no	no	restricted
Treasuries	minimum $1,000	yes	4.66 - 5.08	yes	no	no	restricted