What are money market accounts and how much do they earn?

I have a money market account, but can't seem to get enough information on how it all works.

What are money market accounts and how much do they earn?
A money market account is basically a savings account with check writing privileges. It typically earns 4%-5% rate of return. It's great to use as a emergency fund, but not great as a investment vehicle. I would recommend good, growth stock mutual funds as an investment.
Reply:First, you can download my free book at http://www.invest-for-retirement.com and go straight to page 99, where I discuss money market accounts.





Money market accounts purchase high-quality bonds that have a very short maturity. They are very liquid, meaning that these bonds are readily tradable and with very little costs to trade them. Because of this, these ultra-short bonds are sometimes called "cash equivalents." The most prominent securities that a money market account will purchase are Treasury Bills and bank CDs. Because these securities are very safe, a money market account is considered a very safe and conservative investment. However, with low risk comes low return.





One cool feature about money market accounts is that the shares are held constant at $1 per share. For every dollar you invest, you buy one share. For every dollar you take out, you sell one share. The bonds pay interest and the reinvested interest simply buys more $1 shares.





Most money market accounts allow you to write checks from them, as long as it is for $250 or more. So, it combines the interest from a savings account with the check-writing ability from a checking account. Despite this, money market accounts often pay more than traditional savings accounts. As such, no person today should have a savings account ... but should use a money market account instead.





Money market accounts are great places to park money temporarily or to save for a goal that is less than 2 years away. Also, I stick my emergency money in one.
Reply:vanguard has some excellent money markets...they earn between 5-6 percent just like a cd....however, the money is totally liquid which means yoiu can get your money any time...also, you can write checks from it..thoiugh there is usually a 250 dollar minimum for each check...i use my money market in place of my cd/checking account since it does both..go to vanguard , they have a large number of money markets that you can choose from
Reply:It is a savings account you can write five checks out of a month. They are generally invested in bonds, which are a pretty safe investment, but not generally a good return. I put my emergency/spending money into one and transfer over to my checking for bills. Checking accounts generally pay very little return 1-2% maybe.