Money market accounts, money market funds, and high-yield savings accounts. Three similar-sounding products with meaningful differences in insurance, access, and yield.
Getting this wrong on $100,000 in cash savings costs you $1,000-$1,500 per year in missed interest. Getting it right is 30 minutes of setup.
The Three Products Explained
| Product | What It Is | FDIC/SIPC? | Yield (2026) |
|---|---|---|---|
| High-Yield Savings Account (HYSA) | Bank account, variable APY | FDIC up to $250k | 4.50-5.00% |
| Money Market Account (MMA) | Bank account, check-writing, debit card | FDIC up to $250k | 4.00-4.75% |
| Money Market Fund (MMF) | Investment fund holding short-term securities | SIPC (not FDIC) | 4.75-5.20% |
The critical difference: HYSA and MMA are bank accounts insured by the FDIC. Money market funds are investment products. Not FDIC insured. Though they are considered extremely safe (they hold T-bills, government repos, and agency securities).
Current Rate Comparison (2026)
| Account | Best Current Rate |
|---|---|
| Fidelity Government Money Market (SPAXX) | 4.95% |
| Vanguard Federal Money Market (VMFXX) | 4.89% |
| Schwab Value Advantage Money Fund | 4.82% |
| Marcus by Goldman Sachs HYSA | 4.75% |
| SoFi Savings Account | 4.60% |
| Ally Bank HYSA | 4.50% |
| Chase Premier Savings | 0.01% (avoid) |
The gap between the best money market fund and the worst traditional bank savings account exceeds 4.9%. On $50,000, that is $2,450/year in extra interest.
$50,000 Over 1 Year: The Dollar Difference
| Account | Rate | Annual Interest |
|---|---|---|
| Fidelity SPAXX (money market fund) | 4.95% | $2,475 |
| Marcus HYSA | 4.75% | $2,375 |
| Ally HYSA | 4.50% | $2,250 |
| National average savings | 0.46% | $230 |
| Chase savings | 0.01% | $5 |
The money market fund pays $2,470 more than Chase. That is not a rounding error. It is 495 times more interest.
Tax Treatment
Both HYSAs and money market funds produce interest taxable as ordinary income. The exception: municipal money market funds hold state/local government debt, producing interest exempt from federal income tax (and often from state tax in the fund's home state).
For high-income earners in the top federal brackets plus high-state-tax states (CA, NY), tax-exempt money market yields are worth comparing:
| Fund Type | Yield | After-Tax Yield (37% federal + 10% state) |
|---|---|---|
| Government MMF | 4.95% | 2.62% |
| National Muni MMF | 3.10% | 3.10% |
| CA Muni MMF | 2.90% | 4.84% (CA resident) |
For a California resident in the 37% federal bracket, a CA muni money market fund paying 2.90% is equivalent to a taxable fund paying 4.84%. Potentially better than the government fund after all taxes.
When to Use Each
| Situation | Best Choice |
|---|---|
| Emergency fund (must be FDIC insured) | HYSA: best rate with FDIC protection |
| Brokerage cash (core position) | Money market fund: highest yield, simple setup |
| Checking buffer | Money market account: check-writing, debit card access |
| Very large balance (above $250k FDIC limit) | Money market fund or spread across multiple banks |
| High-tax-bracket investor | Compare tax-equivalent yields; muni MMF may win |
How to Access Money Market Funds
Major brokerages make this easy:
- Fidelity: SPAXX is the default core position (automatically holds uninvested cash)
- Vanguard: VMFXX as the settlement fund
- Schwab: SWVXX (Value Advantage Money Fund, must manually sweep to it)
Money market funds within a brokerage account are accessible in 1 business day (sell and the cash is available for trading or withdrawal the next day).
Frequently Asked Questions
Have money market funds ever "broken the buck"?
Twice in history. The Reserve Primary Fund "broke the buck" (fell below $1.00/share) in 2008 due to exposure to Lehman Brothers commercial paper. Government money market funds (which hold only US government securities) have never broken the buck and are regulated to maintain a stable $1.00 NAV. For safety-first investors, choose government-only money market funds.
Can I write checks from a money market fund?
From a money market account (bank product): yes. From a money market fund (brokerage product): typically no. You need to transfer to a checking account first. This is a minor inconvenience; automated transfers from the brokerage to your checking account handle this automatically for regular cash needs.
Should I keep my emergency fund in a HYSA or money market fund?
Either works. For strict FDIC safety, use a HYSA and stay under $250,000 per bank. For maximum yield (slightly above FDIC-insured options), a government money market fund is reasonable. These hold only US government obligations and are widely considered equivalent in practice. The 0.2-0.4% yield advantage may not be worth the slight theoretical protection difference for pure emergency funds.
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