Money market account facts for kids
A Money Market Account (often called an MMA) is a special type of bank account where you can save your money. It's like a savings account, but it usually pays you more interest. Interest is the extra money the bank gives you for keeping your money with them.
MMAs get their interest rates from something called the "money market." This is a big financial market where banks and large companies lend and borrow money from each other. Because of this, the interest rates on MMAs can change more often than regular savings accounts.
Sometimes, banks might ask you to keep a certain amount of money in your MMA. If you don't, you might have to pay a fee or earn less interest.
It's important not to confuse Money Market Accounts (MMAs) with money market funds. Money market funds are a type of investment, like a mutual fund, and they work differently.
Money Market Accounts in the United States
What Makes Them Special?
Money Market Accounts in the United States are protected by the Federal Deposit Insurance Corporation (FDIC). This means your money is safe, even if the bank has problems. This is a big difference from money market funds, which are not insured by the FDIC.
While you can sometimes write checks from an MMA, there are rules about how many times you can take money out or transfer it each month. These rules are set by the government to make sure MMAs are used more for saving than for everyday spending.
Compared to a regular savings account, MMAs often require you to keep more money in them. They also have more complex ways of calculating the interest you earn.
A Little History
Money Market Accounts became available in the United States in the 1980s. Before that, banks had strict rules about what kind of accounts they could offer and how much interest they could pay.
In 1982, new laws allowed banks to offer MMAs. At first, you needed at least $2,500 to open one, and you could only make a few transfers or withdrawals each month. Over time, some of these rules changed. For example, the minimum amount needed to open an account was removed in 1986. These changes made it easier for people to use MMAs for their savings.
