Investing Money Markets

What is a CD and what is a money market acct? How are they different from a regular savings?

I have some money that I want to put into some sort of a savings. I am confused about all this. Say I put in 10K (for easy #s) into a cd or money market with 4.04% interest how much would it make a month? Could I take the money out or would it have to stay? Could I take out just the interest each month? any info would be great. Thank you

Public Comments

1. A CD is for a set amount of time, anywhere from 30 days to 6 years. Usually the longer the term the higher the interest rate. You usually have some fee to pay if you withdraw the money before the end of the term. A money market allows you to withdraw money, but you are usually limited to the number of times (like 5 or less per month) that you withdraw. A regular savings has the lowest interest rate, but there is no restrictions.
2. They both generally pay higher interest rates than a normal savings account. Where they differ is that a money market account is liquid, meaning you can take your money out or put more in at any time. With a CD, you can't take the money out until the CD is due. When you open a CD, you decide how long to make it: 3, 6, 12, 18, 24, and 36 month CDs are typical. Also the interest rate is locked in when you open the CD, with a money market account, it fluctuates. For most accounts, the interest just gets compounded back into the CD or money market fund, but there are banks that let you take the interest out every month or quarter, you'll have to check with them first.
3. The short answer: CDs are time deposits. A Three Month CD at 4.04% means that you must give them the money for 3 months and they will pay you interest that calculates to 4.04% per year. 4.04% per = 0.3367% per month. So my guess is that after 3 months your CD would be worth $10,101 ~ give or take. A money market account is like a savings account but it has different rules and usually has much higher minimums. At a bank they are FDIC insured up to $100,000 but pay a lower rate. At financial companies -- Like Vanguard.com -- they are not general FDIC insured but pay slightly more and have more generous withdrawal rules. In general, you can only make a limited number of withdrawals from a money market account. However, you can pull the whole amount out any time.
4. ok it is easy a CD is where you give your money to the goverment for use over a set perioud of time and when the time is up the goverment pays you back with little enterest as to where a money market is like stocks to answer your how much would you make a mounth on ten K the intrest rait is for the whole time you let them have it i beleave i have never done it
5. you might want to look into I Bonds too. They look better than CD's but can only put 10k a year in. A bond is basically you loaning the Government money, a CD is you loaning a bank money. Plus they are not taxed by state and local. Here's the link. http://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm