Building a strong financial future takes careful planning and thoughtful investing. Depending on your savings goals, a money market account could be great way to put away money for emergency situations, while still growing your assets.
Below we’ve included an excerpt from our interview with Richard and the following reflects his opinions regarding frugal living and investing in money market accounts.
What is your recommended starting point for financial planning?
Probably the best starting point is to establish a solid budget discipline – plan your expenses, and demonstrate that you can stick to that plan. Over time, as you start to incorporate multiple goals such as buying a home and saving for retirement, financial planning becomes more complex. Yet, the fundamental core of it remains the same – and that is the ability to think ahead and the discipline to stick with a plan.
An emergency fund is an ideal place to start saving, so it makes sense to start building one as soon as you enter the workplace. If that’s not feasible, then at least as soon as a young person first gets a raise – part of that raise should be directed toward building an emergency fund.
What are some of your top reasons to add a money market account to your savings portfolio?
Two characteristics stand out about money market accounts – liquidity and safety. Therefore, they are a great vehicle for funding crucial, short-term needs, or protecting against the possibility of unexpected needs coming up.
Can you explain the main differences between savings accounts and money market accounts?
Savings and money market accounts are pretty much interchangeable in terms of characteristics and the roles they play. Basically, the availability of both savings and money market accounts gives consumers more options when shopping around for the best interest rates.
At what point in someone's career or life is a money market most beneficial?
Actually, a money market account can play a role throughout a person’s adult life. When just starting out, it is important to begin saving but also retain immediate access to your money in case emergencies arise. Later on, when presumably a person has accumulated a more diversified portfolio of investments, money markets can still play a role because they can provide a cushion of immediate liquidity so you don’t have to disrupt longer-term investments when needs arise.
Do you have any final thoughts to share with members?
Money market accounts may not seem like a very exciting savings option at a time of super-low interest rates, but it is when rates are low that saving money becomes most important. The less your money is able to grow by earning interest, the more you need to pick up the slack by boosting savings.
Richard Barrington is a personal finance expert for MoneyRates.com, a leading source of information on bank rates, personal finance, savings accounts and investing since 1999. He is a 20-year veteran of the financial industry and has written for over 50 financial websites, including Investopedia, Yahoo, Huffington Post and MSN.
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