If you’ve ever been a part of a Municipal government – in leadership, city council, Board of Ed or a finance committee you will completely understand how daunting money management can be. Not only are you dealing with budgets and all the pressure that goes along with creating the right one, hoping it gets approved and makes everyone happy (or the majority at least), but you also need to make sound decisions when it comes to your investments and portfolio management.
Although interest rates remain fairly low, the interest earned on a town/cities money in the bank is significant – so choosing the right account for your municipality is critical. Enter the Money Market Account. Not only do you enjoy greater earnings on your funds, but you don’t lose access to them – it’s the best of a savings and a checking account.
Money Market Accounts are easily confused with Money Market Funds. It’s important to know the difference between the two. A Money Market Account is a type of deposit account, like a checking or savings account. MMA’s are FDIC insured, and you open an account at a financial institution. It’s often referred to as a hybrid account because you earn interest like a savings account, but you can write checks against it like a checking account. You can withdraw your money at any time and the interest rate can change at any time as well.
A Money Market Fund is a mutual fund. MMF’s are not insured by the FDIC, your principal is not guaranteed, and you purchase them through a broker. It’s very similar to regular mutual funds with the exception that typically MMF’s invest into less risky investments like bonds and short-term commercial paper.
So why would a Money Market Account make sense for a municipality? Simple. You can earn interest while maintaining maximum flexibility of your funds. Money Market Accounts have tiered, competitive interest rates, especially when compared to traditional savings accounts. You can access your money whenever you need to unlimited over-the-counter withdrawals, transfers, and debits. You have access to up to 6 monthly pre-authorized withdrawals.
At Litchfield Bancorp, we take working with municipalities one step further with our Treasury Management Services. We help you make the most of your working capital with greater control. Our solutions are backed by experienced treasury management professionals who are dedicated to understanding your business and providing customized solutions – from merchant services to positive pay to sweep accounts. Can’t make it into one of our 5 convenient locations, no problem. We offer free onsite visits to determine what services best meet your needs, set up and implementation and training for your employees. Learn more about our comprehensive Treasury Management Service by CLICKING HERE.
Paul A. McLaughlin, Jr
Executive Vice President, Chief Operating Officer