Everyone has (or should have) both short- and long-term financial needs and goals. You need to pay this month's bills; you need to cover this year's property taxes; you want to build wealth for retirement. And sometimes you feel like you're pulled in different directions. So where do money market accounts fit into this balancing act?"I like think of it as having different buckets into which you put your money," says Steve Stanganelli, a certified financial planner at Clear View Wealth Advisors, in Amesbury, Massachusetts. “You have the short-term bucket, which is the money you need for running your day-to-day life. That's usually your checking account. Then you have a little longer-term bucket, which is for emergency funds or things you can see coming a little further down the road.”
Money in a money-market account insured by the Federal Deposit Insurance Corporation (FDIC) makes sense as this second "bucket," Stanganelli says, because it's a very secure place to put your money, pays some interest to help hedge against inflation, and yet doesn't lock up your savings for a period of time, should you need to get to it quickly. You can write checks and make other withdrawals within federal transaction limits.
The longest-term “bucket” may hold your investments for retirement, college savings or other goals that are still many years or even decades in the future. This is the bucket where riskier investments that come with higher potential profits belong. While building wealth for long-term goals is important, Stanganelli notes that making sure you've built an emergency cushion is key. "You really have to take care of the basics before you go off and do the more advanced stuff," he said. Be sure to consult a financial advisor familiar with your situation for investment purposes.
A money-market account can be a smart place to put money aside if you're saving for a big purchase—a new car, for instance, a boat or a down payment for a home.And, Stanganelli says, it can be an option if you find yourself in an unsettling personal transition. "Say you've had recent death in the family, and you're trying to figure out how to deal with the money coming in from life insurance or an inheritance. You need to just sit down and get over the personal emotional effects before you make any big decisions," he said. It can be a good place to park your money while you sort things out.
When his clients are nearing or in retirement, Stanganelli also suggests they keep roughly two years of expenses in a secure account, with money markets being a solid option. The funds can provide additional protection against the ups and down of riskier investments.
With an Ally Bank Money Market Account, you earn a variable rate that's consistently among the most competitive in the country according to Bankrate.com, and you can open and fund your account with any amount. You pay no monthly maintenance fees and you get free standard checks and a debit card for convenient access to your money. You can use any Allpoint no-fee ATM—plus receive up to $10 reimbursement for fees charged at other ATMs nationwide each statement cycle.
Learn more about the Ally Money Market Account by visiting AllyBank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.
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