Savings accounts and money market funds are alike, in that both are accounts where you can park cash and earn interest. But they're different in many ways. Learn more about each account to see which might be the right option for you.
What is a money market mutual fund?
A money market fund is a type of mutual fund that pools investors' dollars to buy high-quality debt securities—think: investable debt, such as bonds issued by the government or corporations—with short maturities and low credit risk. Money market mutual funds can invest in, for example, certificates of deposit (CDs), US Treasury bills, or high-grade commercial paper (unsecured, short-term debt issued by companies and institutions with strong credit ratings). There are 3 main types of money market mutual funds:
- Government:1 Government money market funds can hold cash, Treasury securities, and repurchase agreements, which are simultaneous agreements to buy a security at one price and sell it back at an agreed-upon price.
- Prime:2 Prime money market funds invest in similar vehicles as government money market funds as well as in commercial paper and CDs, among other securities.
- Municipal:3 These invest mostly in securities issued by city, county, and state governments and agencies. Interest earned on municipal money market funds is usually exempt from federal income taxes and possibly state taxes if you live in the state issuing the fund's municipal securities.
A money market mutual fund seeks to preserve a $1.00 net asset value (NAV) per share, but it isn't insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.1 The interest rate policy of the Federal Reserve (the Fed) has been a key driver for money market fund yields over the long term.
Is a money market fund the same as a money market account?
Despite a similar name, a money market mutual fund is not the same as a money market account, and they operate differently. A money market mutual fund is an investment product available through a brokerage firm and earns a yield. A money market account (MMA), or money market deposit account (MMDA), is a bank product that earns interest like a savings account and provides easy access to your money.
When you open a money market account at a bank or credit union, it may come with a debit card or checks, but there may be a limit on the number of electronic withdrawals you can make per billing cycle. If your bank is FDIC-insured and fails, your money is protected up to $250,000 per depositor, per institution, per account category. Credit unions also protect your money up to the same amount, though deposits are insured by a federal agency called the National Credit Union Administration (NCUA).
What is a savings account?
A savings account is an account at a bank or credit union that pays interest on the money you deposit. You can use a savings account to hold money for short- or long-term goals, but like a money market account, some banks may limit the number of electronic withdrawals you can make each month. Savings accounts generally don't come with checks or debit cards.
Banks generally make money by loaning your cash to borrowers at a certain interest rate, paying you a lower rate, then pocketing the difference. Interest earned from savings accounts is taxable income. As of October 2025, the average interest rate on a traditional savings account was 0.40%,4 according to the FDIC. That tends to be lower than the average rates high-yield savings accounts offer.
What is a high-yield savings account?
A high-yield savings account (HYSA) is a type of savings account that pays a higher interest rate than a regular savings account. You might find that online-only banks offer the most competitive rates, largely because they have fewer operating expenses than brick-and-mortar banks. Annual percentage yields (APYs) vary, but as of October 2025, rates average 1.72% with top rates in the 4% range.
APYs are variable, and they can go up and down as the bank's appetite for deposits changes, and as the Federal Reserve adjusts its target rate range. As the federal funds rate goes down, yields on high-yield savings accounts usually do the same.
Money market mutual funds vs. savings accounts: Key similarities and differences
| Money market funds | Savings accounts | |
| May be appropriate for | Investors whose objective is principal preservation (not growth), liquidity (access), and current income | Savers looking for a safe place to hold their cash while earning a modest return |
| Access | Daily access | Number of electronic withdrawals may be limited per month or statement period |
| Growth potential | Limited over the long term | Limited over the long term |
| Current rates and yields | Research Fidelity rates | Not offered by Fidelity |
| Rate change frequency | Normally changes daily | Can change at any time |
| Earnings payment frequency | Dividends accrue daily, paid monthly (plus occasional capital gains) | Interest could compound daily, monthly, quarterly, or annually, typically paid monthly |
| Product insurance or guarantee | Not insured or guaranteed by the FDIC or any other government agency | Virtually all savings accounts are FDIC- or NCUA-insured |
| Potential tax benefits | Interest earned on municipal funds are generally exempt from federal income taxes (and possibly state income taxes) | none |
When might a money market fund make sense?
A money market fund might be a good option if:
- It offers a higher yield than the interest on a savings account
- You want the convenience of saving and investing in one place
- You want unrestricted access to your money
- You want the potential for tax-free income that municipal money market funds offer
- You're comfortable keeping emergency savings in a fund (like Fidelity® Government Money Market Fund SPAXX) that is covered by the Securities Investor Protection Corporation (SIPC) but not FDIC-insured.
Related: What is SIPC coverage?
When might a savings account make sense?
A traditional or high-yield savings account may make sense if:
- You're looking for a safe holding place for your emergency savings, backed by insurance.
- You want to link it to a checking account you already have at a particular bank or credit union, which may reduce fees.
Note that you can have both a money market fund and a savings account; you don't need to choose between them.
How to invest in a money market fund
Follow these steps if you're ready to invest in a money market fund:
- Choose a reputable fund company or brokerage, like Fidelity, that offers money market funds.
- Choose an account to open there, like a taxable brokerage account or Cash Management Account
- Follow the instructions to open that account, such as supplying requested personal information on their website.
- Choose a money market fund to invest in. You can find Fidelity money market funds at: Mutual Funds Research. (Choose “Money Market” from the dropdown menu under “Asset Class and Category,” then select “View [X#] Funds.”)
- Fund the account. You'll need to connect a different account with cash in it and transfer money into this one.
- Invest in the money market fund. Or if you transfer money into a new brokerage account at Fidelity, any uninvested cash will be automatically swept into a government money market fund like Fidelity® Government Money Market Fund (SPAXX).2
How to open a savings account
Opening a savings account is usually a straightforward process. Here's how to get started:
- Find the bank or credit union where you'd like to keep your cash.
- Find an account there that works best for you. Be sure to understand any minimum balances you must maintain, or fees charged.
- Contact the bank or credit union and submit an application. You can likely do this online in just a few minutes.