Most people use checking and savings accounts as the cornerstones of their monetary asset management efforts. When income begins to exceed expenses on a regular basis, perhaps by $200 or $300 each month, a substantial amount of excess funds can quickly build up. Although this situation is a comfortable one, it is wise from a monetary asset management point of view to move some of the excess funds into an account that pays more interest. A money market account is any of a variety of interest-earning accounts that pays relatively high interest rates (compared with regular savings accounts) and offers some limited check-writing privileges. A money market account provides both checking and savings tools at a higher interest rate. Such accounts are offered by banks, savings banks, credit unions, stock brokerage firms, financial services companies, and mutual funds. The types of money market accounts are super NOW accounts, money market deposit accounts, money market mutual funds, and asset management accounts
Super NOW Accounts
A super NOW account is a government-insured money market account offered through depository institutions. It takes the form of a high-interest NOW account with limited checking privileges (usually a maximum of six checks per month). The initial minimum deposit typically ranges from $1000 to $2500. If the average balance falls below a specified amount (such as $1000), the account reverts to earning interest at the lower rate offered on a regular NOW checking account. Depositors can withdraw their unds (using checks or a debit card or electronically) at any time without penalty
Super NOW Accounts
A super NOW account is a government-insured money market account offered through depository institutions. It takes the form of a high-interest NOW account with limited checking privileges (usually a maximum of six checks per month). The initial minimum deposit typically ranges from $1000 to $2500. If the average balance falls below a specified amount (such as $1000), the account reverts to earning interest at the lower rate offered on a regular NOW checking account. Depositors can withdraw their unds (using checks or a debit card or electronically) at any time without penalty
Money Market Deposit Accounts
A money market deposit account (MMDA) is also a government-insured money market account offered through a depository institution. It has minimum-balance requirements and tiered interest rates that vary with the size of the account balance. Institutions are allowed to establish fees for transactions and account maintenance, and account holders typically are limited to three to six transactions each month.Often the customer must deposit $1000 to open an account. If t e average monthly balance falls below a certain amount, such as $2500, the entire account earns interest at the lower rate of a regular NOW account. MMDAs generally pay higher interest rates than super NOW accounts
Money Market Mutual Funds
A money market mutual fund (MMMF) is a money market account in a mutual fund investment company (rather than at a depository institution). It pools the cash of thousands of investors and earns a relatively safe and high return by buying debts with very short-term maturities (always less than one year). Interest is calculated daily, and an investor can withdraw funds at any time. Money market mutual funds typically pay the highest rate of return that can be earned on a daily basis by small investors.MMMFs, which require a minimum deposit ranging from $500 to $1000, can prove convenient in cases of special financial needs because checks can be drawn on the account. On the other hand, the minimum check limit is often $200, which serves to discourage use of the MMMF as an everyday checking account. At least three dozen mutual funds offer unlimited check writing with no minimums on check amounts, however. Electronic transfers are permitted, but ATMs cannot be used because MMMFs are not depository institutions. Although MMMFs are not insured by any federal agency, they are considered extremely safe. Some funds buy only debts of the U.S. government and therefore are virtuallyrisk free.
Asset Management Accounts
An asset management account (AMA; also known as an allin one account) is a multiple-purpose, coordinated package that gathers most of the customer’s monetary asset management vehicles into a unified account and reports them on a single monthly statement. Included in this package might be transactions in a money market mutual fund and in checking, credit card, debit card, loan, and stock brokerage accounts. Also known as central asset accounts, AMAs are offered through depository institutions, stock brokerage firms, financial services companies, and mutual funds. Such an account enables you to conduct all of your financial business with one institution. Typically, $10,000, spread across all subaccounts, is required to open an AMA. Some AMAs assess an annual fee, usually $100. Notice that this would be a 1 percent fee on a $10,000 deposit ($100 $10,000) and reduce your return by 1 percentage point.
Institutions that offer AMAs use computer programs to manage the funds in these accounts. Daily or weekly, the program checks the various subaccounts and sweeps funds in and out of the MMMF to ensure that the highest interest rates apply to the funds. AMAs usually have other features that attract investors as well— for example, free credit and debit cards, a rebate of 1 percent on credit card purchases, free traveler’s checks, inexpensive term life insurance, and a free investment advisory newslette
A money market deposit account (MMDA) is also a government-insured money market account offered through a depository institution. It has minimum-balance requirements and tiered interest rates that vary with the size of the account balance. Institutions are allowed to establish fees for transactions and account maintenance, and account holders typically are limited to three to six transactions each month.Often the customer must deposit $1000 to open an account. If t e average monthly balance falls below a certain amount, such as $2500, the entire account earns interest at the lower rate of a regular NOW account. MMDAs generally pay higher interest rates than super NOW accounts
Money Market Mutual Funds
A money market mutual fund (MMMF) is a money market account in a mutual fund investment company (rather than at a depository institution). It pools the cash of thousands of investors and earns a relatively safe and high return by buying debts with very short-term maturities (always less than one year). Interest is calculated daily, and an investor can withdraw funds at any time. Money market mutual funds typically pay the highest rate of return that can be earned on a daily basis by small investors.MMMFs, which require a minimum deposit ranging from $500 to $1000, can prove convenient in cases of special financial needs because checks can be drawn on the account. On the other hand, the minimum check limit is often $200, which serves to discourage use of the MMMF as an everyday checking account. At least three dozen mutual funds offer unlimited check writing with no minimums on check amounts, however. Electronic transfers are permitted, but ATMs cannot be used because MMMFs are not depository institutions. Although MMMFs are not insured by any federal agency, they are considered extremely safe. Some funds buy only debts of the U.S. government and therefore are virtuallyrisk free.
Asset Management Accounts
An asset management account (AMA; also known as an allin one account) is a multiple-purpose, coordinated package that gathers most of the customer’s monetary asset management vehicles into a unified account and reports them on a single monthly statement. Included in this package might be transactions in a money market mutual fund and in checking, credit card, debit card, loan, and stock brokerage accounts. Also known as central asset accounts, AMAs are offered through depository institutions, stock brokerage firms, financial services companies, and mutual funds. Such an account enables you to conduct all of your financial business with one institution. Typically, $10,000, spread across all subaccounts, is required to open an AMA. Some AMAs assess an annual fee, usually $100. Notice that this would be a 1 percent fee on a $10,000 deposit ($100 $10,000) and reduce your return by 1 percentage point.
Institutions that offer AMAs use computer programs to manage the funds in these accounts. Daily or weekly, the program checks the various subaccounts and sweeps funds in and out of the MMMF to ensure that the highest interest rates apply to the funds. AMAs usually have other features that attract investors as well— for example, free credit and debit cards, a rebate of 1 percent on credit card purchases, free traveler’s checks, inexpensive term life insurance, and a free investment advisory newslette
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