For many people who start building their savings, the instinctual option is a high-yield online savings accounts. As their account balances increases, they want to consider turning it up a notch by earning better yields from money market accounts.

The term “money market” is often a cause of confusion for many people who are looking to start working on their savings goals. It deters them from learning more about money market accounts while they simply opt for a “savings” account.

Nevertheless, a savings account is a great start. Your very first bank account was most likely a traditional savings account, not a money market account. But, as your savings and financial savvy starts growing, you may opt to upgrade to a money market account for a higher rate of return.

Here are the prominent signs that you’ve outgrown your savings account:

You start accumulating more than $10,000 in a savings account.

When you’ve been diligent in establishing a sizable savings of over $10,000, it may be time to open a money market account to take advantage of higher APYs.

Many money market accounts require a $10,000 minimum balance to obtain the highest APY available. Fall below that threshold and your rate may drop or a fee may be imposed.

Some banks do not have a required minimum balance for their money market accounts, which would be great even if you didn’t have $10,000 saved up. The Ally Money Market Account is an example of a money market account with no minimum balance or monthly fee.

Interest rates start rising.

Currently, interest rates are so low that money market rates offer returns similar to those of high-yield online savings accounts. In some cases, money market rates have fallen lower than savings accounts. For example, the Discover Bank Money Market account pays 1.10% APY while the Discover Bank Online Savings account pays 1.20% APY (rates as of 3/28/11).

Money market account usually generate higher yields than savings accounts when benchmark interest rates are higher. When the Federal Reserve decides to raise interest rates, money market rates will beat high-yield savings rates. And if you plan to continue building your savings, it would be good move to transfer part of your stash into a money market account so your cash can grow faster.

You want easy, but infrequent, access to cash in savings.

A debit card and check-writing are major selling points for money market accounts because it usually takes 3-4 days to transfer funds out of a savings account. But, money market accounts restrict customers to only 6 transactions per month so they don’t function entirely like a checking account.

If you feel that a debit card and paper checks would come in handy for unexpected events but want to keep your cash earning interest, a money market account would fit the bill.

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