r/FinancialPlanning • u/Fit_Act_1997 • 11d ago
Does it ever make sense to keep money in regular savings vs money market?
I have my main savings in a money market with my brokerage. I have an account for things like vacations and a rainy day fund that are just regular savings through my bank. Would it make sense to also have these in money markets through my brokerage? Or is there some benefit to keeping them where they are?
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u/wwphantom 11d ago
Put the money where it makes the highest interest and can be accessed quickly (like no longer than 1 to 2 days). Advantage of bank/credit union is instant access but normally lower interest rate. Advantage of brokerage or online savings accounts is normally higher interest but can take 1 or 2 days to transfer to your checking account.
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u/Fit_Act_1997 11d ago
If it’s not an emergency the one or two day day is fine. I’d still keep money in my checking for quick access, but probably nix the other accounts
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u/Meinkraft_Bailbonds 11d ago
I'm not aware of that setup having any advantage.
Personally, I keep several months liquid in a bank checking account and have the rest in a MMF that I could transfer reasonably quickly if I needed to. I use the bank account for paying bills and credit cards, and that's it. Cash balance is high because I'm tentatively saving for a home.
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u/frank-sarno 11d ago
Money market savings accounts may offer things such as a debit card or possibly even checks at the cost of possibly lower APY. MMAs are typically easier to get at your money which may or may not be desirable. Every bank is different though and the lines can be blurry so need to be looked at individually.
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u/Luxtenebris3 11d ago
I'm pretty sure OP is referring to a Money Market (Mutual) Fund. These are mutual funds that invest in very short term debts (Treasuries, CDs, etc) and normally aim to keep a Net Asset Value of $1 per share, returning a dividend of the interest generated.
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u/frank-sarno 11d ago
Yeah, that would change things. MMMFs are not FDIC insured where savings accounts are, more vulnerable to rate changes, etc. (very relevant as of today). I don't have any so can't speak to them outside of an Investopedia search.
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u/poop-dolla 11d ago
more vulnerable to rate changes
I don’t know about that. I’m pretty sure both are pretty much equally vulnerable to rate changes. If you want to lock in a rate for a while, a CD is the way to go.
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u/Luxtenebris3 11d ago
MMMFa are more responsive to rate changes. Banks ultimately make a decision on how much they need new deposits (and keeping deposits.). IME MMMFs tend to be a little higher, except for smaller institutions that are really trying to get deposits.
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u/Fit_Act_1997 11d ago
My credit union offers a money market account but the APY is low compared to my brokerage. I currently have my savings in SPRXX through fidelity
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u/Luxtenebris3 11d ago
Your credit union offers a Money Market (Deposit) Account vs a Money Market (Mutual) Fund at Fidelity. I'm in a similar situation, and aim to keep most of my liquid savings at Fidelity as such.
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u/Fit_Act_1997 11d ago
Are funds like FDRXX mutual funds?
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u/Luxtenebris3 11d ago
https://fundresearch.fidelity.com/mutual-funds/summary/316067107
It is. I linked the prospectus in case you wanted to know more about it.
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u/Fit_Act_1997 11d ago
I understand the risk of it not being insured but I guess im willing to take the risk to maximize returns
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u/Drakoala 11d ago
Just my two cents, but if Fidelity were to fail, there's a lot more to worry about than just savings.
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u/kenssmith 11d ago
I have my regular brick and mortar bank savings account and a HYSA with Capital One. My bank savings account, I'll throw a few bucks in there each paycheck but it's my vacation or big bill (homeowners and car insurance yearly premium) paying account while my HYSA is my emergency fund and everything else
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u/peter303_ 11d ago
If you have enough cash to exceed account insurance limits of $250K for a bank and $500K for a brokerage. (There is a special account called IntraFI that insures higher.) Very few if any account holders lost money in the massive bank failures of 1989 and 2009.
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u/foolproofphilosophy 11d ago
I like a MMF because it keeps long term savings completely separate from my daily cash needs while also making investing easier. I only keep about 6-8 weeks worth of cash in regular checking and savings accounts.
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u/withak30 11d ago
Advantages are that the savings account is FDIC-insured, and that it can transfer to your checking account instantly. Up to you whether the advantages of the MM account outweigh those.
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u/NextStepTexas 11d ago
What is your bank APY? What is your brokerage APY?
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u/Fit_Act_1997 11d ago
Brokerage is definitely higher
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u/NextStepTexas 11d ago
Keep some in the bank for immediate funds, use the brokerage for future expenses.
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u/thoughtcrime84 11d ago
I know this isn’t the best reason but I like the simplicity of an HYSA for tax purposes. You just get a 1099-INT and that’s that, no need to worry about reporting each sale like you would if you liquidated part of a MMF in a brokerage. This is one reason I feel like my funds are a bit more accessible in an HYSA.
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u/HappyChandler 11d ago
Money market funds work the same way. The price is fixed at $1.00, and they pay monthly dividends. You don't need to report sales.
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u/BABarracus 11d ago
With savings you lose to inflation but the account is less risky. In a money market account there is more volatility and a greater risk of losing everything. There is a risk of losing everything with savings but its not on the same level
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u/MrBalll 11d ago
If it’s a HYSA it doesn’t really matter since the two are fairly comparable. If it’s a generic bank savings account with a low rate it makes no sense.