How are money market funds paid out?
A money market fund aims to maintain a net asset value (NAV) of $1 per share, though there is no guarantee. Any excess earnings that get generated through interest on the portfolio holdings are distributed to the investors in the form of dividend payments.
The primary difference between a money market account and a savings account is how you can access your money. With a money market account, you'll typically get a checkbook and/or debit card. You can write checks against the account's balance or use the debit card to make purchases and withdraw money from ATMs.
Money market accounts work like other deposit accounts, such as savings accounts. As customers deposit funds in a money market account, they earn interest on those funds. Typically, interest on money market accounts is compounded daily and paid monthly.
Money market mutual funds. An investment whose objective is to earn interest for shareholders while maintaining a net asset value (NAV) of $1 per share. The portfolio is comprised of short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments.
Money market funds are a type of mutual fund that invests in high quality short-term debt. They pay dividends that generally reflect short-term interest rates. Money market funds try to maintain a stable value called a “net asset value” or NAV, typically $1.00 per share.
- Make sure that your card is linked to your account,
- Tell the Cashier that you would like to withdraw cash from your Money Market Account using your Xtra Savings card,
- Swipe your Xtra Savings card on the card machine,
- Select “CASH”,
- Give the cash to the Cashier,
As of May 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.
| Account | National average money market account | Sallie Mae Money Market |
|---|---|---|
| Deposit amount | $10,000 | $10,000 |
| APY | 0.68% APY | 4.65% APY |
| Earnings after six months | $33.94 | $229.86 |
| Earnings after 1 year | $68 | $465 |
Interest is generally calculated daily for money market accounts and paid out at the end of each month directly into the account.
The money market is defined as dealing in debt of less than one year. It is primarily used by governments and corporations to keep their cash flow steady, and for investors to make a modest profit. The capital market is dedicated to the sale and purchase of long-term debt and equity instruments.
Is a money market fund a deposit?
An investment in MMFs is different from an investment in deposits; the principal invested in an MMF is capable of fluctuation and the risk of loss of the principal is to be borne by the investor. The MMF does not rely on external support for guaranteeing the liquidity of the MMF or stabilizing the NAV per share.
Types of money market funds
Investments can include short-term U.S. Treasury securities, federal agency notes, Eurodollar deposits, repurchase agreements, certificates of deposit, corporate commercial paper, and obligations of states, cities, or other types of municipal agencies—depending on the focus of the fund.
Usually you can make unlimited withdrawals and payments by using an ATM or by making the withdrawal in person, by mail, or by telephone. A money market account might require a minimum amount to be deposited.
Competitive Returns: Interest is calculated daily and credited at the end of each month. As an institutional client, the fund benefits from placing deposits in large sums and as such is able to negotiate for competitive rates.
If you totally cash in your MMF in the middle of the month, you'll receive the cumulative declared dividends from the 1st of the month to when you sold out.
Money market funds invest in high quality, short-term debt securities and pay dividends that generally reflect short-term interest rates. Many investors use money market funds to store cash or as an alternative to investing in the stock market.
The 7-Day Yield represents the annualized fund yield based on the average income paid out over the previous seven days assuming interest income is not reinvested and it reflects the effect of all applicable waivers. Absent such waivers, the fund's yield would have been lower.
Money Market Funds
Ultra-conservative investors and unsophisticated investors often stash their cash in money market funds. While these funds provide a high degree of safety, they should only be used for short-term investment. There's no need to avoid equity funds when the economy is slowing.
There is no direct way to lose money in a money market account. However, it is possible to lose money indirectly. For example, if the interest rate you receive on your account balance can no longer keep up with any penalty fees you may be assessed, the value of the account can fall below the initial deposit.
Money market accounts usually allow account holders to make withdrawals and transfers, and may allow debit-card transactions and online bill pay like regular checking accounts. But be aware that there may be limits on how frequently you can make withdrawals or transfers from a money market account.
Is my money stuck in a money market account?
Your money is not bound for a predetermined duration. Instead, you can withdraw funds when needed, giving you control over your finances. So, your money is never really stuck. However, MMAs sometimes charge small penalties if your balance drops below a certain amount or you make more withdrawals than agreed.
| Account | Forbes Advisor Rating | Annual Percentage Yield |
|---|---|---|
| M1 High-Yield Savings Account | 4.3 | 5.00% |
| Bask Interest Savings Account | 4.2 | 5.10% |
| UFB Secure Savings | 4.1 | Up to 5.25% |
| Salem Five Direct eOne Savings | 4.0 | 5.01% |
- Landmark Credit Union Premium Checking (7.50% APY) ...
- Digital Credit Union Primary Savings (6.17% APY) ...
- Popular Direct High-Yield Savings (5.20% APY) ...
- TAB Bank High Yield Savings (5.27% APY) ...
- High-yield savings accounts. ...
- Certificates of deposit (CDs) ...
- Money market accounts (MMAs)
Can You Get a 7% CD Account? There was a lot of excitement in August 2023 about a few credit unions offering 7% APYs on certificates. But those rates were offered for a limited time only and are no longer available. However, the nation's best CD rates are still well above 5%, with some pushing toward 6%.
Some money market accounts come with minimum account balances to be able to earn the higher rate of interest. Six to 12 months of living expenses are typically recommended for the amount of money that should be kept in cash in these types of accounts for unforeseen emergencies and life events.
