Academy/Banking, Cash & Internal Controls
Money-market accounts
The same phrase names two different financial products, and only one of them is insured.
A bank's money market deposit account is FDIC insured, like a savings account, up to $250,000 per depositor per bank, combined with the association's other deposits there. A money market fund is a mutual fund, not a bank deposit, and carries no FDIC insurance.
Same name, two different products
Ask a bank for a "money market account" and you get a money market deposit account: a bank product that works like savings, sometimes with check-writing or debit privileges attached. Ask a broker for a "money market fund" and you get shares in a mutual fund. Same phrase, two different products, and the difference decides whether your reserves are protected if the institution fails.
"Money market funds are a type of mutual fund that invest in liquid, short-term debt securities, cash and cash equivalents."
Source: Money Market Fund, U.S. Securities and Exchange Commission
FDIC coverage follows the product, not the name
"The standard maximum deposit insurance amount is $250,000 per depositor, per insured bank, for each account ownership category."
Source: Your Insured Deposits, FDIC
Your association is one depositor. Its checking account, its money market deposit account, and any CDs at the same bank, all under the association's own tax ID, are added together toward that single $250,000 ceiling. They do not get separate limits just because they are different account types, and naming more board members as signers does not raise the cap either. A money market fund sits outside this system entirely: it is not a deposit product, so no FDIC ceiling applies to it, and no FDIC insurance protects it. If your reserves are pushing past $250,000 at one bank, see FDIC coverage for what that actually means and what your options are.
Which one belongs in your reserves
A widely used framework for public and quasi-public reserve investing ranks priorities in a fixed order: safety of principal first, access to the money second, return on it last. A money market deposit account scores well on the first two as long as the balance stays under the FDIC limit. A money market fund can offer a better yield, but it trades away the FDIC guarantee for the fund's own short-term holdings, a different kind of safety, not insurance. Before parking reserves anywhere, confirm which product you are actually being offered, and compare it against CDs and Treasury products as part of a written investment policy.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Your bank offers a "money market account" with a better rate than savings. What actually determines whether it is FDIC insured?
The association's only funds at Second National Bank are $280,000 in a money market deposit account. How much of that is FDIC insured?
A broker tells your board its "money market fund" beats every bank rate nearby. Before moving reserve funds there, what should the board confirm first?
Sources
- Your Insured Deposits, FDIC
- Money Market Fund, U.S. Securities and Exchange Commission
- Sample Investment Policy (GFOA model, as adopted), Government Finance Officers Association
Banking, Cash & Internal Controls
Once you know which product you're holding, check how the $250,000 FDIC limit applies across all of your association's accounts.
Which product a given bank or broker calls a "money market account," whether check-writing is included, and how a fund's holdings are structured vary by institution. Confirm the actual product type directly with your bank or broker before relying on FDIC coverage.