Once a person learns what a money market account is, they have a logical next question: what can I do with it?
That's a good question. After all, it's always good to know what options you have to make your money work better for you. With that in mind, let's take a look at some of the uses of money market accounts.
"Parking" your money
Let's say you have a chunk of money and you aren't going to allocate it toward investments, purchases, or debt payments anytime in the near future. You can "park" your funds in a money market account and earn dividends. Whenever you are ready to use that money you have quick and easy access to it.
Many financial planners suggest having an emergency fund. It's time-tested advice. Save for a rainy day. Some experts say to have between 3 to 9 months of monthly expenses set aside in case of those rainy days. A money market account is a great place to put that money.
A Good Place for Savings Goals
Do you have a savings goal? Maybe you have a goal of saving up for a large purchase like a car or down payment for a house. Why not use a money market account?
Reduced Risk for Conservative Money Management
There are various times when one might find it more appropriate to manage their money in a conservative way. Sometimes reducing risk of loss is the primary goal. Let's say one is approaching retirement and the goal is to protect what has been earned and have access to it when needed. In this case, a money market account may be preferable to stocks and other kinds of investments.
Perhaps, the economy has you uncertain about your investment moves. You'd rather play it safe for a while. You can turn to a money market for a safe place to keep your money for as long as you need. Then you can move the money when you are ready.