Money market funds and savings accounts are frequently treated as interchangeable places to park cash. The legal structure underneath them is entirely different.
One is a deposit, the other is a security
A savings account is a liability of the bank. The customer has lent money to the institution, and the bank owes it back on demand.
A money market fund is a pooled investment. The customer owns shares in a portfolio of short term instruments, and the fund holds those securities on their behalf.
That distinction drives everything else, including who stands behind the balance if something goes wrong and what the balance is legally worth.
Protection works through different mechanisms
Bank deposits carry federal deposit insurance up to statutory limits per depositor and ownership category, which pays out if the bank itself fails.
Money market funds are not deposits and carry no such insurance. They are held at a broker with separate customer protection rules that cover missing assets, not investment losses.
Neither arrangement guarantees a return. They guarantee different things, and conflating them is the most common misunderstanding in this corner of personal finance.
The yield comes from different sources
A bank sets its deposit rate as a business decision, balancing what it must pay to retain funding against what it earns lending that money out.
A money market fund passes through what its underlying holdings earn, minus the expense ratio, so its yield tracks short term market rates closely.
This is why fund yields tend to move faster than bank rates when policy rates change, in both directions.
Access is not identical
Savings account withdrawals settle immediately within the bank's systems, and the money is available for transfer or payment the same day.
Fund shares must be sold and settled, which historically introduced a delay, though many brokers now sweep and settle quickly enough that the difference is small.
Where the timing matters is at the edges, such as a wire deadline or a closing date, when a day of settlement becomes consequential.
Share price stability is a policy, not a law
Many money market funds aim to maintain a stable share value, and regulators have set portfolio rules intended to support that objective.
Stability is a design goal rather than a guarantee, and reform after periods of market stress introduced tools such as liquidity fees and redemption gates.
Understanding which structure holds the cash is a factual question a saver can answer from the account documents, and it is worth answering before the cash is needed.