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Deciding to build up your personal savings sets you on a path toward achieving your financial goals. However, there’s more than one way to save. Taking advantage of savings vehicles such as money market accounts (MMA) and certificates of deposit (CDs) can accelerate your savings, providing returns that exceed traditional savings accounts.

“When it comes to managing savings, I love to see savers diversify,” says Shanita Martha, Senior Vice President and Region Manager with Byline Bank. “Once you’ve put funds in your retirement accounts, it’s great to explore other ways to save beyond checking and savings.”

MMAs and CDs are two common options for savvy savers, especially during periods of higher interest rates. Consider the advantages and drawbacks of each, and then employ these savings superstars to help reach your savings goals that much faster.

What are money market accounts?

Icon of a piggy bank, symbolizing savings and CD accounts.

MMAs are interest-bearing savings accounts offered by banks and other financial institutions. They are similar to traditional savings accounts but typically offer higher interest rates, making them attractive options for savers who want to earn more from their money. The flexibility of the accounts is another benefit, enabling savers to access their money when needed.

“Money market accounts are great for short-term, very low-risk investments,” Martha says. The terms for MMAs vary by bank. Some have minimum balances for opening an account, as well as a minimum daily balance requirement for earning the APY.  MMAs may also limit how many transactions you can conduct within a statement period.

What are certificates of deposit?

CDs are another toolCD icon that savers can use to earn more from their money. With a CD, you earn a set interest rate on your savings over a specific period of time, varying from three months to up to 10 years. As with MMAs, the interest rates offered by CDs are often higher than traditional savings accounts, with the rates varying by the term of the CD.

CDs do come with some considerations. Depending on their needs, savers can leverage CDs for mid-term or long-term savings goals. There are penalties for withdrawing early, so the key is knowing you won’t need your money before the specified term ends. “We have a lot of senior customers who use them as part of their financial plan in retirement,” Martha says. “People appreciate the return plus the security associated with a CD.”


Comparing MMAs and CDs

Both of these vehicles can give your savings a boost. But there are some differences between the two. Consider the chart below to compare key aspects of MMAs and CDs to determine how each may fit within your savings goals and financial plan.

TypeIcon of a piggy bank, symbolizing savings and CD accounts.
Money Market accounts
CD icon
Certificates of Deposit
Minimum balance Yes, varies by productYes, varies by product
Liquidity and accessVery liquid, you can withdraw penalty-free as long as you maintain the minimum balance. Some accounts do limit the number of withdrawals.You can face a penalty if you need to access your money before the term of the CD; the penalties vary and are set by the bank, with longer-term CDs typically having larger penalties
Interest ratesVariableFixed
Risk perceptionBecause MMAs are FDIC insured, they’re considered very low riskBecause CDs are FDIC insured, they’re considered very low risk

Making a savings plan of action

MMAs and CDs can play a helpful role in your overall financial plan. Whether you decide to take advantage of one or even both depends on your personal goals and your relationship with your finances. “Money is a matter of the heart,” Martha says. “You have to know yourself and what works with how you manage your finances.”

For example, Martha recommends CDs for individuals who can’t resist dipping into their savings. The duration and the penalty for early withdrawal create a deterrent that can prevent savers from accessing those funds unless it’s a true emergency. MMAs work great for savers who want more flexibility with when they can access their money.

Your savings goals also come into play. Mid- to long-term CDs, for instance, offer appealing interest rates. But they may not be the right choice if you’re saving for an upcoming vacation and need your money within a few months. Parents looking to save for their children’s higher education might use a long-term CD and then move into an MMA once their child is in college so that the funds are more easily accessible.

Turn to a trusted partner

When it comes to MMAs and CDs, there are numerous options available to consumers. However, Martha recommends working with a trusted banking partner.

“You want to know that your banking partner is solid,” she said. “Your banking partner should also help you understand the terms of a savings vehicle, and answer any questions you have about it.”

Ultimately, making a savings plan is an empowering move that will help you achieve your financial goals. “It’s never too late to start saving,” Martha says. As you build your plan, consider the role of MMAs and CDs in accelerating your saving progress.

To learn more about the differences between money market accounts and certificates of deposit, connect with a Byline Banker today.