Money market accounts create an excellent opportunity to save for retirement. However, this is only the case if you are using your account the right way. There are a number of seemingly minor issues that can tap into your ability to yield a return from your account in a negative way. Make sure you know what not to do.
Overlooking Minimum Investment Requirements
The primary reason for having a money market account is to earn a return. However, if you aren't maintaining the required minimum investment, you won't be making any money off the account.
More importantly, depending on the financial institution that you have the account with, the account could even be closed. Don't make the mistake of overlooking this factor when you first open the account and as you make changes to it.
Thinking Long-Term Investment
While a great investment, money market accounts shouldn't be viewed as a long-term investment. The reason for this is that the more money you have in the market account the more interest you will generate. Therefore, the more money you will make.
However, if you're like most people, you're establishing this account so that you can someday tap into it and use it as an additional source of income. Once you start withdrawing money, your interest accumulation will lower. Only look at this as a temporary money maker.
Not Researching Interest Rate
Similar to credit card offers, money market accounts will sometimes offer specialized interest rates to new holders. Make sure you are researching the terms of the elevated interest rate, particularly when it comes to the length of time it is being offered.
If you fail to do so, you might think that you are earning interest at a higher rate than you are. Imagine the dissatisfaction when you find out that this was only an introductory rate and that you're aren't quite as far ahead with your financial goals as you had thought.
Failing To Consider Fees
Many money market accounts will come with certain fees. Some of these fees include penalties for falling below the balance requirement or writing too many checks within a given period. Some institutions even charge an account initiation fee when you first open a new account.
When you research fees associated with the account, it's much easier to avoid them and therefore save money. Make sure you are reviewing all the fees associated with your account.
Make sure you are avoiding these mistakes to keep your returns from your money market account higher.