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A less understood option involves money market accounts and funds. Money market accounts, offered by banks and FDIC insured, typically offer slightly better interest rates than standard savings accounts but come with limited access (often restricted to a few monthly transactions). Conversely, money market funds are not insured and charge the user a fee when redeeming during tough economic times, as evidenced by the crisis of 2008 when several funds lost their fixed value.
The impending changes to money market funds introduce even more risk, as new SEC regulations will allow fund values to fluctuate, potentially compromising the stability that previously defined them. Thus, it is essential to understand these differences before deciding where to place your cash.