Advantages

• Interest is compounded daily or weekly.

• Probably the most convenient and flexible of the cash equivalent investments.

• Many have a low investment minimum (good for beginning investors).

• Usually have lower fees and pay higher interest than bank money market funds.

• Many have check-writing privileges and regular account statements.

• Often you can handle transactions by telephone, mail, or wire.

• Shares are always priced at $1 and can be redeemed by telephone or mail.

Disadvantages

• You may be limited on the size of checks (often $250 or $500) and the number of them written in a given period.

• You must pay local, state, and federal taxes on income.

• Your money is not insured (however, no money market mutual fund has ever failed).

Money market mutual funds are sold through financial institutions and usually invested in treasury bills, bank certificates of deposit, and commercial paper. The funds usually respond faster to a rise in interest rates than a bank money market account and can change daily. Interest rates vary from fund to fund, which are managed by private corporations. A no-load fund charges no commission to make the initial deposit. You can arrange to have money automatically deposited into the account.

Use the Savings Alternatives worksheet to shop and compare places to stash your cash.