do money market accounts lose money

When you’re looking for a safe place to park your savings, money market accounts often come highly recommended. They typically offer higher interest rates than standard savings accounts and provide easy access to your cash. But in an uncertain economy, it’s natural to wonder about the safety of your funds. You might find yourself asking, do money market accounts lose money?

The short answer is that it’s very rare, but not entirely impossible. For the vast majority of account holders, a money market account is a low-risk and reliable financial tool. Let’s look at what makes them generally safe and the specific scenarios where risk exists.

The Typical Safety Net of Money Market Accounts

Money market accounts are considered one of the safer banking products. They are offered by federally insured banks and credit unions. This means your deposits are protected by the FDIC (for banks) or NCUA (for credit unions) up to at least $250,000 per depositor, per institution. This insurance is your primary safety net, guaranteeing you won’t lose your deposited funds if the financial institution itself fails.

When You Might Wonder: Do Money Market Accounts Lose Money?

While your principal is protected from bank failure, there are two main ways your money’s value could be negatively affected. The first is inflation. If the interest rate you’re earning on your account is lower than the current inflation rate, the purchasing power of your money effectively decreases over time. Your account balance grows numerically, but it won’t buy as much.

The second, and much rarer, scenario involves money market funds, which are different from money market accounts. These are investment products, not bank accounts, and are not FDIC-insured. It is possible, though historically very uncommon, for a money market fund to “break the buck,” meaning its value drops below the standard $1 per share.

Keeping Your Savings Strategy on Track

To ensure your money market account works for you, focus on the real interest rate—that’s the rate after accounting for inflation. Shop around for accounts offering competitive rates to help your savings keep pace. Always confirm that your chosen institution is FDIC or NCUA insured. Finally, be certain you’re opening a money market account at a bank, not investing in a money market fund, unless you intentionally seek that different type of product.

In summary, while no financial product is entirely without some form of risk, the chance of losing your deposited money in an FDIC or NCUA-insured money market account is exceptionally low. It remains a solid choice for a accessible, stable, and interest-earning savings vehicle.