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What are Money Market and Cash Management Accounts?

17 Dec - Posted at 12:00h in Financial Planning

There are so many different types of high-yield savings accounts available to teachers and public employees that it can be hard to choose where to put your hard-earned money. Money Market and Cash Management accounts are places you can put that money. Getting a better understanding of what accounts you should use to invest money into your savings can have a huge effect on your finances in the long run.

To understand high-yield savings accounts better, we have broken down two common savings account types for teachers and public employees—money market (high-yield savings account) and cash management accounts. Keep reading to find out which one might be a good choice for you!

What is the difference between cash management and money market accounts?

Cash management accounts (CMAs) are typically provided by nonbank financial service providers (such as internet advisors or investment firms), while high-yield savings accounts are provided by banks.

Both cash management accounts and money market (high-yield savings) accounts are solid options if you're looking to earn high interest on your cash in a short amount of time. The Annual Percentage Yield (APY) on average for these accounts falls within the range of 1.00-2.00%. This is a marked increase from the 0.05% savings rate you can find with a typical brick-and-mortar bank.

Cash Management Accounts vs. High-Yield Savings Accounts

  • There is a federally restricted limit on the number of withdrawals a customer with a high-yield savings account can make, while CMAs are not restricted by the number of withdrawals.
  • Federal insurance is provided using different methods depending on the account type.
  • Check-writing is available with some CMAs.

Similarities between Cash Management and Money Market Accounts

  • Both have high interest rates.
  • Both accounts are a good short- to medium-term place for savings, such as an emergency fund.
  • Funds are federally insured.
  • For both, there are similar things to consider before opening an account, such as fees, minimum balances, ATM access and whether you can link accounts.
  • Funds are subject to fluctuating interest rates that are dependent on the federal funds rate (the rate at which banks can lend money to each other).

Which option is right for me?

If you're looking for simplified account ownership, above average checking and savings rates, and an alternative to traditional banking, a CMA might be right for you.

High yield savings accounts offer the convenience, familiarity, and benefits you would typically receive with a bank. These accounts can be a great place to store your cash. These accounts can also allow cash to earn some interest without frequent withdrawals.

Give us a Call

At Appreciation Financial, we can help you to decide which option is right for you. We know the numbers and rules and differences can be confusing, and our team of financial experts is prepared to answer all of your questions, help you to decide between a cash management account vs. a high-yield savings account, and more. Contact us now.