Savings, Money Market, CD or Money Fund? What Each One Is For

Four places to keep cash have names that sound alike: savings account, money market account, CD and money market fund. They all hold cash. They differ in three ways: how fast you can reach the money, what insures it, and how the rate can change. This chapter explains each one. It also shows why a name on a sign tells you very little.

The rate examples here are made up unless a source is named. Today's best rates are on our savings page.

What are the four places?

A savings account is a bank account that pays interest. A high-yield savings account is the same thing at a bank that pays much more than average. Online banks often do. You can move money in and out by electronic transfer.

A money market account is also a bank account. It works like savings, and some offer limited check-writing or a debit card. The word "money market" is the bank's label. It is not a different kind of safety.

A CD (certificate of deposit) is a bank deposit with a lock. You agree to leave the money for a set time, from a few months to five years. The bank agrees to a fixed rate for that whole time. Take the money out early and you usually pay a penalty. The chapter on CD penalties shows what it costs.

A money market fund is an investment, not a bank account. A brokerage sells it. The fund lends money for very short times to governments and companies. Rules let some funds aim for a steady $1 share price, but nothing promises it (17 CFR 270.2a-7).

How do they compare?

The FDIC insures deposits up to $250,000 per depositor, per insured bank, for each account ownership category. Its list of products it does not insure includes mutual funds (FDIC). Money funds are a type of mutual fund. If a brokerage fails, SIPC protects missing cash and securities. It does not protect against a drop in value (SIPC).

How much do rates matter?

The FDIC publishes national average rates. On its page dated September 21, 2026, the national savings rate was 0.37%, the money market rate was 0.63%, and the 12-month CD rate was 1.73%. These are averages across many banks. Many accounts pay more or less.

Here is one year of interest on $50,000. The 4.00% is a made-up example of what a high-paying account might offer. It is not a live rate.

The made-up account earns $1,815 more than the national savings average. The money and the insurance are the same. The next chapter, why online banks pay more, explains why the gap exists. For today's actual numbers, the top savings rate we track is 4.27% and the top CD rate is 5.00%.

What does the Fed change for each one?

The Federal Reserve sets a target range for short-term rates. It is now 3.75% to 4.00%. A savings or money market account can change its rate whenever the bank decides. It often follows the Fed, slowly and unevenly. A money fund's holdings roll over often, so its payout usually follows within weeks. A CD does not change. Your rate stays fixed, and only new CDs pay a different rate. The chapter on the Fed covers this in full.

Which job does each one fit?

This is not advice for your case. It shows how the account's features line up with common jobs.

Where should you go next?

This guide has ten chapters. Read in order, or jump to the one you need:

1. This chapter: what each account is.
2. Why online banks pay more: why rates differ.
3. The four fine-print checks: what to read before you open an account.
4. A $100,000 plan: one way to split a large balance.
5. When your rate drops: whether moving is worth the trouble.
6. Tax and money funds: whether tax changes the winner.
7. How much to keep: savings by life stage.
8. The Fed: what a rate hike means for your cash.
9. Age and cash: whether your age changes the answer.
10. Five other options: Treasury bills, brokered CDs and more.

Limits of this guide.

• The 4.00% rate and the $50,000 balance are made-up examples.
• The FDIC national rates are averages dated September 21, 2026, and change monthly.
• Interest is simple, for one year, with no compounding.