Make Your Money Work for You with Mutual Market Funds
Interest rates for money market funds are typically significantly higher than interest rates on savings accounts. In exchange for the favorable interest rates they offer for such accounts, banks require a substantial minimum balance. The high interest rates that come with money market accounts are great for those with a bit of disposable money.
Make your Money Earn for You
Recent surveys done by Forrester Research reveal the 30% of American families have over $10,000 in savings or checking accounts, earning little interest or none at all. If you can afford to keep that much money idle in a low-yield savings account, you should seriously consider moving some of it to a money market account. The minimum balance for most money market accounts is only $1,000, and when it is more than that, it isn’t much more.
Federal Reserve Influence on Money Market Fund Rates
As the Federal Reserve continues to push for an increase in target interest rates, the potential earning from money market funds will exceed those of online savings accounts very soon. The 2.25% to 4.5% increase in the Federal Reserve’s funds in the previous year caused money market fund rates to increase from an average of 1.77% to 4.5%.
Such money market funds have the additional benefit of being tax free. Supply of and demand for municipal bonds is what drives the yields either up or down. It should be noted though that when the Federal Reserve jacks up rates, taxable investments climb more steadily than non-taxable ones.
Is it right for you bracket?
Your income tax bracket will dictate whether or not such an investment will suit you. If you are paying 28% income tax or more, then it makes sense to put money into tax free investments; however, if you are in a lower bracket, you should weigh your taxable yields against your tax rate. If your taxable yields are quite high, then money market funds could be just the ticket.
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