Retirement & IRAs

Money Market Savings Accounts vs. Money Market Mutual Funds

There is a lot of confusion about the difference between money market savings accounts and money market mutual funds. Many people mistakenly believe that a money market savings account is a mutual fund or equity account. Money market savings accounts and money market mutual funds are both considered cash equivalents, and they do have some things in common.

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Money market savings accounts and money market mutual funds offer some of the same benefits. One of these may be a good fit if you:
  • Require stability of principal
  • Are seeking an investment for the cash portion of an asset allocation program
  • Are looking for an investment with a lower degree of risk during uncertain economic times or periods of stock market volatility
  • Consider yourself a saver rather than an investor

But there are also important differences, especially when it comes to retirement.

Money Market Savings Accounts

Money market savings accounts offer the benefits of both a savings and checking account. The customer earns interest while still being able to write checks and withdraw or transfer funds.

These accounts sometimes offer higher interest rates than a regular savings account. But they differ from checking accounts because they limit the number of transfers or withdrawals per month, how those transfers can be made and whom they can be made to.

Accounts that exceed these limitations may be subject to a fee and/or closed. Money market savings accounts are protected by the Federal Deposit Insurance Corporation (FDIC) when opened at a bank that is a member of the FDIC.1

Money Market Mutual Funds

Money market mutual funds seek to preserve the amount invested by maintaining a net asset value (NAV) of $1 per share. They may also produce a small, but not guaranteed, return for the investor.

The mutual fund portfolios are comprised of short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments. Examples include short-term obligations issued or guaranteed by U.S. Corporations or state and municipal governments, high-grade commercial paper, and U.S. Treasury securities. Money market mutual funds are not FDIC insured.

Money market funds are not appropriate for individuals who are seeking an investment that is likely to significantly outpace inflation or investing for growth or maximum current income.

For additional information, please contact your State Farm® agent.


Before investing, consider the funds' investment objectives, risks, charges and expenses. Contact State Farm VP Management Corp (800-447-4930) for a prospectus or summary prospectus containing this and other information. Read it carefully.

Securities, insurance and annuity products are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.

An investment in the Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.

Neither State Farm nor its agents provide investment, tax, or legal advice.

Source for concepts included in this article: Back Room Technician, courtesy of Advisys, Inc.

1State Farm Bank money market saving accounts are a product of State Farm Bank, Bloomington, Illinois, is a Member FDIC and Equal Housing Lender. NMLS ID 139716. The other products offered by affiliate companies of State Farm Bank are not FDIC insured, not a State Farm Bank obligation or guaranteed by State Farm Bank, and subject to investment risk, including possible loss of principal invested. Contact State Farm Bank toll-free at 877-SF4-BANK (877-734-2265).