Money Market Accounts vs Money Market Funds Comparison for Kids and Teens
This video performs a money market accounts vs money market funds comparison in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about money market accounts and funds, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Elementary School
- Middle School
- High School
The topics covered are:
- What is a money market account
- What is a money market fund
- Money market accounts vs money market funds: The differences
- Money market accounts vs money market funds: Which one should you choose
What is a money market account?
A money market account or MMA is an interest-paying account offered by banks and credit unions.
It combines the benefits of both savings and checking accounts, by offering the earning potential of a savings account along with the flexibility and convenience of a checking account.
What is a money market fund?
A money market fund or MMF, also called a money market mutual fund, is a type of fixed income mutual fund.
It invests in very low-risk, highly liquid, short-term debt securities like government bonds, municipal bonds and investment grade corporate bonds, as well as cash and cash equivalents like Certificate of Deposit (CD).
It also pays some interest, which could be taxable or tax-exempt depending on its portfolio.
Money Market Accounts vs Money Market Funds
They sound very similar. How are they different?
While they are both very low risk avenues to park cash safely for the short term, there are some key differences.
A money market account is a deposit account whereas a money market fund is a type of investment product. Because MMA is a type of bank account, it is insured by the FDIC up to $250,000.
This means your money is absolutely safe even if the bank goes bankrupt.
MMF on the other hand is a type of mutual fund and comes with no such guarantee.
While MMF is one of the safest investments, there is always a risk of losing your principal. Even if you don’t lose your entire investment, the price fluctuations of MMFs mean that you might end up with less than what you invested.
Another major difference is regarding the fees charged.
Money market accounts usually charge fees for going below the minimum balance or for exceeding the number of permitted transactions. So these fees can be avoided as long as the customer meets the requirements.
On the other hand, money market funds are actively managed and the fees charged by them are for managing the account. Although these fees vary by provider, they are usually unavoidable, and eat into your returns.
Money Market Accounts vs Money Market Funds: Which one should I choose?
If you are completely risk-averse, can take absolutely no chances with your money, and are comfortable maintaining the minimum balance, a money market account would be a good choice.
That said, since money market funds invest in very safe, highly liquid securities, the risk of losing your investment is very minimal.
So you can opt for MMFs if their returns are significantly higher.
Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens
Podcast: Money Market Accounts vs Money Market Funds
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
A comprehensive money market accounts vs money market funds comparison: find out the differences, and decide which one you should choose. Show notes and transcript at Money Market Accounts vs Money Market Funds: A Simple Comparison for Kids A comprehensive money market accounts vs money market funds comparison: find out the differences, and decide which …
