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Money Market vs High Yield Savings Account

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    Money Market vs High Yield Savings Account

    Hello,

    I have a question about where to put my emergency fund. Right now I have about six/seven months of living expenses stashed in a high-yield online savings account at an interest rate of 0.95%. Some advice I have seen recommends money market accounts over savings accounts, but I can't see where a money market account will return more than 0.95%.

    For example, the Vanguard prime money market fund shows a compound yield of 0.61%, on top of which it charges me expenses of 0.16% for managing my money (I can't post a link but the symbol is VMMXX).

    Is there something I'm not understanding about these numbers? Are yield and interest rate not comparable? If they are, why would a money market fund make more sense than my high-yield savings account?

    Any explanation would be very helpful.

    Thanks.

    #2
    I think what you need is a CapitalOne360 Money Market (1%). I've also seen Ally Bank mentioned elsewhere.

    If you have a Money Market in your brokerage account there will be fees associated with it.

    Also, it may be that Savings Account and Money Market account terms are used loosely.

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      #3
      until rates increase (who knows when) I keep my emergency fund money in my checking account
      Gunga galunga...gunga -- gunga galunga.

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        #4
        A money market account is a type of savings account and is different from a money market fund.

        As far as your current savings account, are you happy with it? I'm a big-time rate chaser myself, and not loyal to any bank, but I wouldn't change my account if I was happy with it and if the difference in interest rates is so small (0.95% vs 1.00%). Rates change. You could leave a bank you like for one you don't and then the rates could flip on you, and you'd just wind up regretting the decision.

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          #5
          Originally posted by Elementary View Post

          I have a question about where to put my emergency fund. Right now I have about six/seven months of living expenses stashed in a high-yield online savings account at an interest rate of 0.95%.
          Leave it where it is. At the moment, anything around 1% on your EF is just fine.
          seek knowledge, not answers
          personal finance

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            #6
            Originally posted by Elementary View Post
            Hello,

            I have a question about where to put my emergency fund. Right now I have about six/seven months of living expenses stashed in a high-yield online savings account at an interest rate of 0.95%. Some advice I have seen recommends money market accounts over savings accounts, but I can't see where a money market account will return more than 0.95%.

            For example, the Vanguard prime money market fund shows a compound yield of 0.61%, on top of which it charges me expenses of 0.16% for managing my money (I can't post a link but the symbol is VMMXX).

            Is there something I'm not understanding about these numbers? Are yield and interest rate not comparable? If they are, why would a money market fund make more sense than my high-yield savings account?

            Any explanation would be very helpful.

            Thanks.
            No, I don't think you misunderstand at all. Which is why my "e-fund + deferred spending" pile-o-money is in a mixture of:
            checking (just what I'll need that month, plus a little extra)
            • Capital One 360 savings, 0.75% APR
            • Ally Bank savings, 1% APR
            • Various CDs at Ally, CO360 and Synchrony.

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