What is the difference between a savings account and a money market account?

I want to open a savings account separate from my checking account to earn a higher interest rate. I keep reading about "money market accounts." What is the different between a savings account and a money market account? What are the advantages/disadvantages to having either one? Thank you!|||A savings account is insured by the FDIC. If the bank goes under, your money in the account is safe, up to 250,000. However, most of your money is not really "held" in the bank. The bank turns around and lends about 90% it to other people so they can earn interest and investment income. Normally savings account pay very small interest rates, not even enough to keep up with inflation.





A money market account is an investment account and it is not insured. You could technically lose everything in it. However, this has never happened in the history of money market accounts, due to the very safe types of investments (high volume of very short-term treasuries and commercial paper). Additionally, for every dollar you put in, there is an actual dollar backing it in the account.





Normally money market accounts pay higher interest than savings accounts, however, in this day and age this may not be happening currently. You need to confirm the rates.





Both Money Markets and Savings accounts are generally used to store "emergency funds" These would be funds that are easily accessible and intended to retain their value of the short term, so you have access to cash, if you need it.|||They are fairly similar. The rules for each can be a little different depending on where you get the accounts so you need to check out the details....but in general:





both will pay a small interest rate


the money market will typically offer a slightly higher rate


the money market account will have a higher minimum deposit (ie larger amount to open the account)


some money markets limit the # of transactions a month





With overall interest rates so low right now, neither one is going to pay much interest. Consider looking at other ways to "invest" the money. The most obvious would be to put the funds to paying off other debt that you may have, say credit card or mortgage, either of those will give you a much better return than putting the money into a savings account