The stock market's volatility in 2016 has some investors looking for places to park their money – anything from a nest egg or an emergency fund.
While stocks have rallied over the last few weeks, they have mostly regained the value they had at the start of the year. Government bonds and certificates of deposit (CD), meanwhile, can tie up money for extended periods of time.
But savings accounts, and their cousin – the money market account – may provide a safe and flexible place to temporarily park some cash, The FDIC insured up to $250,000. While most of these accounts pay a minuscule amount of interest, a few stand out by paying 1% or more.
$25,000 or more
If you have a significant amount of cash to deposit – $25,000 or more – it will be hard to beat the savings account at UFB Direct. It pays 1.2%, comparable to many banks' CD rates.
You can open an account with as little as $1, but you won't get nearly as high a rate of interest on balances under $25,000 – around 0.20% APY.
SFGI Direct doesn't pay quite as high of an interest rate on savings, but it's still a fairly impressive 1.06% APY. It doesn't require nearly as much money to earn that rate. It pays on balances of at least $1.
Money market accounts sometimes pay a higher rate of interest, depending on the amount of money in the account. For example, the Patelco Credit Union currently pays 3% APY on balances between $1 and $2,000. The rate declines as the balance rises above $2,000.
Checking into a money market account before automatically selecting a bank's savings account is usually a good idea. They sometimes offer advantages.
"Santander's FDIC-insured money market savings account is a standout because our customers' balances grow faster than in traditional savings accounts while giving them that access through checks, online banking or mobile,” Michael Cleary, Santander's head of consumer and business banking, said in a release. “We design our products so they reflect how people like to bank.”
One of the chief benefits of these money market accounts is they often have tiered interest rates, meaning they pay higher rates of interest if you deposit more money. At the same time, they usually have higher minimum balance requirements to open a new account, meaning you might have to start with a savings account and convert it to a money market once you hit the minimum threshold.
Money market accounts may also make it easier to use the money, giving you limited check-writing privileges, something not usually found with savings accounts.
On a historical basis, the return on keeping your cash in an FDIC-insured bank account is pretty paltry. However, the cash is safe and readily available. By shopping around, you should be able to find the best choice.