Money Market Funds
On top of your savings account, you will likely encounter another type of savings called a money market. There are two different types of money market accounts: money market bank accounts and money market mutual funds.
Money market accounts offered by the bank work the same as a money market mutual fund as far as the consumer is concerned, but since the money held in a money market account is invested a bit differently, there are usually more restrictions on the account. †Most banks will have restrictions like higher balance requirements (typically $1,000 - $2,500 minimum) and a limited number of withdrawals.
Money market mutual funds are not issued by a bank, they are offered by investment companies. You will need to establish a brokerage account to take part in a money market mutual fund. †These funds invest in various short-term securities collectively in order to produce an attractive interest rate. †A money market issued by the bank will be FDIC insured, as opposed to a money market mutual fund, which will not be insured.
Money market accounts generally have higher interest rates than a savings account, but the restriction on the number of withdrawals makes these funds slightly less liquid.