Sunday, April 11, 2010

New Rules for Money Market Accounts

I had to laugh when I read the Kiplinger's article on the new rules for money market funds. You can find the full article here. You see, the one money market fund I participate in, American Funds Money Market Fund, hasn't paid out a dime of interest since July of last year. They're struggling to hold the value of my dollars apparently. I know not every fund has taken their returns to zero, but they're probably close. Bankrate tells me the average money market account is giving out .79% right now. But I tend to have a bias for American Funds, my humble opinion only of course. Plus it is a super-easy to access portion of my emergency fund. When my 32 year old, oops, going on 33 now, water heater finally kicks the bucket, I'll be able to whip out my checkbook and write a check to the plumber.

Anyway, the new rules are written to protect us but in the end they'll take away another .1% of our return. The rules in a nutshell require increased liquidity, better disclosures, and higher quality. If I wanted a super safe spot for my money I would have put it in an FDIC insured savings account. I think the benefits of most money market funds are enough to overcome the small risk that your dollar might turn into 99 cents for a short period. I tend to be a firm believer that if you're going to put your money somewhere, it's your responsibility to understand where you're putting it. If you need help, hire an adviser. I must have missed the news on the money market crisis that ruined everyone's life.