What is the difference between a money market mutual fund and a money market account? If you are like most Americans, many of which actually have one or both of these types of investments, you really aren't all that sure.
Here is a quick tip: Figure it out so you don't embarrass yourself.
A money market account is similar to a savings account. In fact, depending on where you bank you may have your money parked in a MMA. Interest is paid on the deposits and they are federally insured. The difference between MMAs and traditional savings accounts is most notable in a higher interest rate, minimum balance requirement and some limitations on transfers or withdrawals.
Money market mutual funds are completely different. These funds are not federally insured, which means your money is at risk should a loss take place (although rare, it is theoretically possible) and mature in 13 months or less. Money market funds take combined funds and then purchase investments ranging from very safe (for example, government only Treasury funds) to corporate securities.
When purchasing money market funds, be sure you understand the yield after annual account fees and other charges.