Money market accounts are a great way to safely invest your money when you want to earn more than the typical savings account, but still want to have a low risk investment option. Money market accounts can vary from bank to bank or lending institution. Credit Unions even provide their members with money market accounts.  Competitive rates with an investment that provides you with what you’re looking for in a money market account venture can be found with a little shopping in the marketplace.

Money market account earns you a higher yield than a normal savings account; and still retains access to your funds.

Many investors find money market accounts to be one of the best savings options for emergency funds for expenses up to six months. If you want a long term investment for a higher interest rate, but may possibly need your money sooner than three or six months a money market account is a better option than a certificate of deposit or savings account.

Most money market accounts offered allow investors to write checks on the account similar to a checking account.  Most banks will limit the amount of checks that can be written on your account free of charge. This number can vary between institutions. Nonetheless, tons of investors love this attribute of a money market account because it permits you to have easy access to your funds whenever you need them. Other similar long term investments that will penalize you for removing your funds before a maturity date. The only penalty for removing your funds is less principal monies in your account which can result in less interest earned over the long term.

In addition to having easy access to your funds through withdrawal whenever you want, money market accounts are insured by the FDIC or Federal Deposit Insurance Corporation up to the maximum allowed by law. The FDIC coverage was created after the Great Depression because of the number of banks or institutions that failed. If the lending institution is in trouble or your monies are lost for any reason, the federal government will cover that loss if the bank is unable to.

Although money market accounts don’t bring you the highest rate of return for long term investments, they will provide a nice rate of return for savings of at least $5000 or more. Though, one drawback of many investors for money market accounts is they may have a balance requirement that can range from $5000-$10,000 per month. You can shop around and find some lenders that will offer a lower balance requirement ranging from $1000-$2500. Usually the higher the investment, the more interest is paid on your money market account.

The marketplace offers a variety of lenders, interest rates and options for money market account investments. Shop around and find one that matches your needs.

Choosing the right money market account is like walking through a market place - look carefully and you'll soon find one that suits your needs.

Debit cards that allow clients to manage their money in an everyday account while earning the high interest rate of a money market fund are now available, with Sanlam launching this industry first.

Susan van Staden from Sanlam Personal Finance: Strategic Business Development said on Wednesday: "Throughout the world, debit cards are becoming the most convenient alternative to cash and cheques. However, traditional debit cards offered by banking institutions offer very low, if any, interest to clients.

"We believe that people want the liquidity of a money market account, the attractive interest rate offered by a money market account and the functionality of a bank account, and this is exactly what we’ve decided to give them."

Sanlam Liquid

The account, to be called Sanlam Liquid, therefore links with the Sanlam money market fund.

When clients open a Sanlam Liquid account, their deposits (including their salary, if they choose) are invested in the Sanlam money market fund to give them better returns than an ordinary bank deposit account.

Money market funds are protected by strict collective investment regulations, and fees are completely transparent on these accounts.

Van Staden said the Sanlam Liquid card offers clients a day-to-day account with total liquidity and access to their money via a Visa Electron debit card, as well as a full-fledged internet transactional capability for transfers and online payments, as well viewing account balances and statements.

Funds drawn abroad

The card can be used at any point of sale or ATMs where the Visa Electron sign or Saswitch signs are displayed. Funds can also be drawn at any ATM abroad and may be used at international POS terminals displaying the Visa Electron logo.

Since only banks may issue payment instruments and partake in settlements through the National Payment system in terms of current legislation, Rennies Bank acts as issuer of the debit card. This however does not affect the fact that the deposit is actually in the Sanlam money market fund

Well, here we are at the end of another RRSP season. The rush is on to get the contributions in, and the rush is on to figure out where to stuff it. I guess at this point if you haven’t made your contribution yet, the important thing to do is just to make sure it is in an RRSP account somewhere; we can always figure out in a later column what to invest in.

This week, I thought I would include a piece by Jamie Golembek, head of tax and estate planning for AIM Trimark Funds. I think you will find it to be of particular interest, especially at this time of year.

Resolution 1: MAXIMIZE RRSP CONTRIBUTIONS

The contribution limit for registered retirement savings plans for 2006 is the lesser of 18 per cent of 2005 earned income or $18,000. If you don’t have the cash, consider making an RRSP contribution “in-kind.”

Keep in mind, if you contribute a fund with an accrued loss “in-kind” to an RRSP from a non-registered account, that loss is permanently denied. A better strategy would be to switch the fund to a money market fund, realize the capital loss, and then contribute the money market fund to the RRSP.

Resolution 2: MAXIMIZE RRSP FOREIGN CONTENT

With the elimination of the foreign content limit, you now have the option of investing your entire RRSP or registered retirement income fund globally, without any artificial restrictions. Yet surprisingly, many investors are still hovering around the former 30 per cent foreign content limitation.

Resolution 3: SET UP A SPOUSAL RRSP

Spousal RRSPs remain one of the last legal methods of income-splitting between spouses or common-law partners. The primary benefit of a spousal plan is that funds withdrawn from it can be taxed in the hands of the annuitant rather than the contributor. If the annuitant spouse is in a lower tax bracket than the contributor spouse in the year of withdrawal, there may be an absolute and permanent tax savings.

Resolution 4: INVEST OUTSIDE AN RRSP

Investing in shares of multi-class mutual fund corporations (where each class of shares represents a different fund) has an advantage over investing in plain-vanilla mutual funds in that investors can switch from one class of shares to another without incurring any immediate capital gains tax. A secondary, but oft-forgotten benefit, is mutual corporations are generally able to minimize the amount of annual capital gains distributions by using capital losses of one class to offset capital gains otherwise distributable for other classes.

Resolution 5: OPEN UP RESPS FOR (GRAND) CHILDREN

It is nearly eight years since the federal government reinvigorated struggling Registered Education Savings Plans by introducing the Canada Education Savings Grant (CESG) program, which provides a 20 per cent grant on the first $2,000 a year of annual RESP contributions for each beneficiary. Higher grants may apply to low- and middle-income families.

Keep in mind if you have not set up RESPs for children or grandchildren, there is a huge opportunity to go back and collect prior years’ CESGs, cumulatively retroactive to 1998.

Resolution 6: MAKE YOUR INTEREST TAX DEDUCTIBLE

Still carrying a mortgage but also investing outside your RRSP? Under a strategy approved several years ago by the Supreme Court of Canada, you can sell non-registered investments (subject to any capital gain/loss considerations), pay off the mortgage (again, subject to any early payment penalties) and then get a secured line of credit against your home to repurchase the securities sold. This way, your otherwise non-deductible interest becomes tax deductible.

Resolution 7: CONSIDER INCOME SPLITTING

The Canada Revenue Agency announced that the prescribed interest rate for the first quarter of 2006 will remain at 3 per cent. A spousal loan income-splitting strategy whereby the higher income spouse (or partner) loans funds to the lower income spouse to invest may be ideal given the near-record-low prescribed rate required to be charged on such loans.

Resolution 8: CONSIDER A SYSTEMATIC WITHDRAWAL PLAN

Looking for tax-effective cash flow from your mutual fund account? Consider setting up a systematic withdrawal plan which allows you to receive regular, tax-efficient cash flow from your funds. Most fund companies offer this type of plan.

Resolution 9: DONATE “IN-KIND” TO CHARITY

Consider donating appreciated stock or mutual funds directly to charities in 2007. Not only will you get a tax receipt for the fair market value of the stock or funds donated, but you also will be able to reduce your capital gains inclusion rate to 25 per cent from the usual 50 per cent.

Resolution 10: PLAN NOW NOT TO GET A TAX REFUND

Finally, if you regularly get a significant tax refund each spring, perhaps due to RRSP contributions made during the year, you should consider applying to the CRA for a reduction of tax withheld at source by your employer. Because CRA’s Form T1213 needs to be completed each year, January or February is an ideal time to begin the process anew.

User " I sold my house and am walking away with $31,000 profit. I am planning on buying a new house, but not until May. How do I make the most on my return over these few short months — stocks, money market, short-term CD? –Making the most of it Match the life of the investment with the planning horizon. "

If you expect to need the money in May, don’t invest in stocks. Invest instead in a money market mutual fund, money market account or short-term CD.

You shouldn’t be looking to hit a home run with a three-month investment, so don’t swing for the fences by buying stocks.

Depending on your tax bracket and your state of residence, it may make more sense to invest in a tax-exempt municipal money market fund than a taxable money market account or CD.

You can compare all of these investments with a calculator on Bankrate.com. This calculator will estimate your tax equivalent yield on a tax-free investment so you can compare your choices, but you have to know your state laws on tax exemption and the structure of the tax-exempt investment.

If you don’t expect that you’ll need to put all of this money into the new house, then you can consider other investment alternatives for the balance.

Funding an IRA account, for example, might make sense for part of the money. Still, it makes sense to wait and see how much of the money you’ll need before committing any part of the funds to longer term investments.

– Don Taylor/ Bankrate.com

reported by Dr. Don of BankRate.com

Dear Dr. Don,
I sold my house and am walking away with $31,000 profit on Tuesday. I am planning on buying a house, but not until May. How do I make the most on my return over these few short months — stocks, money market, short-term CD? I’m confused.
– Jon Jumble

Dear Jon,
Match the life of the investment with the planning horizon. If you expect to need the money in May, don’t invest in stocks. Invest instead in a money market mutual fund, money market account or short-term CD.

You shouldn’t be looking to hit a home run with a three-month investment, so don’t swing for the fences by buying stocks.  Depending on your tax bracket and your state of residence, it may make more sense to invest in a tax-exempt municipal money market fund than a taxable money market account or CD. You can compare all of these investments on Bankrate.

This CCH calculator will estimate your tax equivalent yield on a tax-free investment so you can compare your choices, but you have to know your state laws on tax exemption and the structure of the tax-exempt investment.

If you don’t expect that you’ll need to put all of this money into the new house, then you can consider other investment alternatives for the balance. Funding an IRA account, for example, might make sense for part of the money. Still, it makes sense to wait and see how much of the money you’ll need before committing any part of the funds to longer term investments