Savings and money market account returns

You need to keep your extra cash that awaits investment (or an emergency)
in a safe place, preferably one that doesn’t get hammered by the sea of
changes in the financial markets. By default and for convenience, many
people keep their extra cash in a bank savings account. Although the bank
offers the U.S. government’s backing via the Federal Deposit Insurance
Corporation (FDIC), it comes at a high price. Most banks pay a low interest
rate on their savings accounts.
Another place to keep your liquid savings is in a money market mutual fund.
These are the safest types of mutual funds around and, for all intents and
purposes, equal a bank savings account’s safety. The best money market
funds generally pay higher yields than most bank savings accounts. Unlike a
bank, money market mutual funds tell you how much they deduct for the service of managing your money. If you’re in a higher tax bracket, tax-free versions of money market funds exist as well. See Chapter 8 for more on money
market funds.
If you don’t need immediate access to your money, consider using Treasury
bills (T-bills) or bank certificates of deposit (CDs), which are usually issued
for terms such as 3, 6, or 12 months. Your money will surely earn more in one
of these vehicles than in a bank savings account. As rates vary by institution,
it is essential to shop around. The drawback to T-bills and bank certificates of
deposit is that you incur a penalty (with CDs) or a transaction fee (with T-bills)
if you withdraw your investment before the term expires