In today’s economy, many people are searching for a safe place to invest their money. Some are confused by the idea of money market investments. This may be due, in part, to the fact that there are two different types of investments labeled “money market”. One is the money market account (MMA), and the other is the money market fund.

An MMA is similar to a savings account with some restrictions. It is offered by banks and credit unions. Money in it is insured by the Federal Deposit Insurance Corporation, (FDIC) if in a bank or the National Credit Union Administration (NCUA) if in a credit union.

A money market fund is sold by a brokerage house. It is actually a mutual fund that buys short-term debt securities maturing in 13 months or fewer. It is not insured by the FDIC. With a money market fund, the value of your initial investment can, and does, vary according to the fluctuations of the market. This means that, at any given point in time, your initial deposit could be worth either more or less than the amount you placed into it, depending upon market conditions.

With a money market account, the element of risk has been removed. The money you deposit will never fluctuate in value. In addition, you will earn interest on it as time passes. Typically, an MMA will pay more interest than a regular savings account. However, an MMA has some restrictions that you will not normally find with a regular savings account.

An MMA will require you to keep a minimum balance. Also, federal regulations allow no more than six transfers or withdrawals in a one-month period. Only three of these transactions may be in the form of checks written against the account. Some banks and credit unions have even stricter rules, and some do not offer checkwriting privileges.

Traditionally, money market rates tend to follow rather than lead economic conditions. As the economy improves, money market interest rates are expected to rise.

A money market account is a good place to put your emergency fund, the money that you will need if the unexpected happens. It is also useful as a temporary deposit location for money that you expect to spend in the future, but do not need to use immediately. It is not a good vehicle for the money you use to pay your monthly bills.