I was talking to someone recently about what it means to invest in money market accounts verses other types of fixed long-term investing. The great thing about a money market account, I learned, is that its like a savings account that you get paid interest on and you can withdraw from it pretty much any day that you need it. For example, say your furnace goes out today and you need money to replace it. Go pull it out of your money market account!
However, in today’s market you might only gain less than 1% interest from your deposit which probably doesn’t make up for the rate of inflation- which might be around 3% and that may be a conservative figure. Also whether you withdraw the money or not you will receive a 1099 at the end of the year and have to pay taxes on it. So is the tax you’ll pay on your money market account worth the little interest you’ll gain? It might be, if you need to have that money liquid to withdraw for emergencies. If you’re already investing or looking to invest in money markets you may find Aurora Bank money market rates to be competitive enough to help you meet your goals.
But if you’re wanting an interest rate that matches or beats that of inflation giving you a greater yield – I’m talking about a long-term investment here- you need to consider “fixed indexed annuities”. This is the kind of stuff that I know Dipre Financial handles.
Money market accounts or fixed, long-term investments? Both have their positives, but which would you choose? Have you ever used a money market account?
*I interviewed a local acquaintance on investing and wrote this Sponsored post on behalf of Aurora Bank.