A Money Market Account (MMA) is a type of savings account offered by banks and credit unions. It typically offers a higher interest rate than a traditional savings account, but often comes with certain restrictions, such as minimum balance requirements or limits on monthly transactions. MMAs are generally considered very safe investments, as they are usually FDIC or NCUA insured up to the legal limits.
How is Interest Calculated?
The interest earned on a money market account is typically calculated daily and compounded monthly. However, for simplicity, this calculator uses a simple interest calculation over the specified period. The formula used here is:
Interest Earned = Principal × (Annual Interest Rate / 100 / 12) × Number of Months
Where:
Principal: The initial amount of money deposited into the account.
Annual Interest Rate: The stated yearly percentage rate of return on the deposit.
Number of Months: The duration for which the money is invested.
Key Factors Influencing Your Earnings:
Principal Amount: A larger initial deposit will generate more interest.
Interest Rate (APY/APR): Higher rates mean faster growth of your money. Money market rates are often variable and can change over time.
Investment Duration: The longer you keep your money invested, the more interest you will accumulate.
When to Use This Calculator:
This calculator is useful for:
Estimating potential earnings from a new money market deposit.
Comparing different money market account offers.
Determining how long it might take to reach a savings goal with interest.
Understanding the impact of fluctuating interest rates on your savings.
Disclaimer: This calculator provides an estimate for educational purposes. Actual interest earned may vary due to factors like daily compounding, fees, variable rates, and bank-specific calculation methods. Always consult with your financial institution for precise figures.