Many cash investments offer the added security of government insurance. High-yielding bank money market accounts and time deposits, such as certificates of deposit, are both insured by the
Federal Deposit Insurance Corporation (FDIC)
to a limit of $100,000 per depositor. Most money market mutual funds, on the other hand, are not insured by the FDIC — although a few fund companies provide private insurance. However, based on past experience, the risk of losing money in a money market account has been negligible.
U.S. Treasury bills
aren't insured either, but they are backed by the federal government, which can raise taxes to repay what it owes.
In general, insured investments pay slightly less interest than uninsured investments. As you
diversify,
or spread, your cash investments among savings, money market accounts and funds, CDs, Treasury bills, and other cash equivalents, you'll want to weigh the absolute security of insurance against the potential drawback of lower
yields.
FDIC insurance provides $100,000 coverage for different types of accounts you may have at the same bank. For example, your IRA is insured to $100,000, and a taxable account is insured for another $100,000. But if you have $200,000 in either account, only half of it is insure
Many cash investments offer the added security of government insurance. High-yielding bank money market accounts and time deposits, such as certificates of deposit, are both insured by the
