How do I Invest in Money Market Accounts?

Money market accounts are investment accounts that pay interest.

Money market accounts are investment accounts that pay interest.

Money market accounts are a type of savings account that holds its money in a mutual fund, investing and reinvesting it in an attempt to keep the price per share as close to $1 as possible. You earn money with a money market account through a revenue sharing system, with the fund holder paying a portion of the interest they earn to the account holders. Money market accounts are often used to hold uninvested money and dividends, though you can invest wholly in the money market fund that your account is part of as well.

Step 1

Shop around at banks and brokerages in your area and online to find money market accounts in which to invest. Find the current average interest rate the accounts offer and whether there is a minimum investment amount required to open an account. You should also ask whether there are penalties for withdrawing money or a limit on the number of withdrawals you can make in a month.

Step 2

Compare different accounts based on average interest paid, account minimums and perks offered by the account such as debit card access or easy access to other investment opportunities. Consider whether the accounts offer higher interest rates when you have larger amounts held in them or if they feature a single rate regardless of your investment. Narrow down your choices until you find the money market account that will earn the most money without subjecting you to unnecessary restrictions.

Step 3

Visit the bank or brokerage that offers the money market account you want and tell a teller or broker that you want to set up an account. You'll need a photo ID or other proof of identification to open the account, as well as an initial deposit equal to or greater than the minimum deposit for the money market fund. The teller or broker will help you fill out the account application and will set up your money market account for you.

Step 4

Make regular deposits into your money market account to keep your balance growing. If your job offers direct deposit options, talk to your boss to see if you can get a portion of your paycheck deposited directly into your money market account. If you have an investment portfolio, deposit any dividends you earn into your money market account if you don't have them automatically reinvested into the stock or bond that generates them.

Step 5

Review your account statement each month to keep track of the performance of your money market account. Invest money from your account into stocks or bonds periodically, especially when the interest rate for your account is dropping. Deposit money earned from stock sales into your account until you reinvest it so that you'll keep earning interest on it. Keep money flowing into your money market account, but don't be afraid to take money out when you find investment opportunities that will earn more than your current interest rate.

Tip

  • Many online brokerages and banks offer money market accounts that you can apply for online. You may be required to fax or mail certain documentation to complete the application process, but otherwise both application and account setup happen completely online.

About the Author

Born in West Virginia, Jack Gerard now lives in Kentucky. A writer and editor with more than 10 years of experience, he has written both articles and poetry for publication in magazines and online. A former nationally ranked sport fencer, Gerard also spent several years as a fencing coach and trainer.

Photo Credits

  • Jupiterimages/BananaStock/Getty Images