What the difference between a regular savings account and a money market fund.?

i have a friend that keeps telling me to open up a money market fund. why is this better than a savings account. most i see are yeilding over 5%. i was thinking about opening upp a roth ira but he suggested that since im already contributing 12% of my pay to a 401(k) i dont need the roth ira.

A savings account is with a bank, and is insured by the FDIC. A money market fund is a mutual fund that buys very short term debt securities in the markets. Technically, you can lose money in a money market fund if the issuers of those securities don't pay back the money. However, up until now, mutual fund companies have taken all the losses that have occured (which aren't a lot) because they make a fortune in fees off of them, and they don't want customers to be scared off by losses. No guarantees this continues to be the case, but money market funds have consistently outperformed savings with no downside.

As far as the Roth IRA goes...a big question is how old are you, what sort of lifestyle you want in retirement, and how much you have already. 12% is good contribution...particularly if you get matching funds. However, if you were say, 55, and just starting out, you might need to do more. If you were 25, and had a large portion of the 401K in stock mutual funds (say, 80%-100%)...you may well already be doing enough. Its a tradeoff between setting aside for tomorrow, and making for a good lifestyle today. There are many good retirement calculators on the web which will take what you have today, what you are contributing, and what you expect to get in the way of returns. Here is one of them.

http://www.bloomberg.com/invest//calcula...

just a higher percentage than a savings but not too much higher. My grandfather told me to open an IRA and with the money in that each year to buy a zero coupon bond. And try to have 1 of the bonds to mature each month of every year after i retire. like at 28 have them mature each month at 60 and 29 mature at 61 and so on and so forth. he says it is something real good to look into

I have an account with immigrant bank and earn over 5% interest and it is a savings that you can take money out at any time.

As for your question not exactly sure, but if you are looking for a good amount of interest to me made I would check out emigrant bank or ING they had something similar too.

Well a Money Market (MMA) yeilds more interest than a savings account! That is my #1 reason to open up a MMA also!
But on the IRA Issue: A ROTH is normally ALWAYS better!
Okay the difference: On a traditional IRA or 401 k - you pay taxes on your investment when it is withdrawn - correct. So say when you retire you have $1 million. When you begin to withdraw - you will be taxed on that amount.
But on a Roth IRA you are taxed on the money as it is contributed each year. So you are paying taxes on about $3-4,000 each year. And when you withdraw it at retirement - it is tax free.
Now think about it. Would you rather pay taxes on 1 million dollars or pay it only on 4,000 a year. It ends up being a lot less paid on taxes by doing a ROTH. And not only, you get to enjoy every penny you invested at retirement.
Just a thought!!!

First a money market fund account is a non fdic insured mutual fund that invest in highly liquid short term securities, pays dividends rather than interest and includes a management fee. A bank savings account is an FDIC insured deposit account with a bank. The differences to a consumer on functionality are minimal as both are highly liquid and good options for short term cash holding. Money market funds typically earn a better return than bank savings accounts but are not FDIC insured and there have been instances in which investors have lost a portion of their principal balance in money market funds when the underlying investments have defaulted although this is extremely rare so much so that it should not prevent you from opening one although you should be aware of the risk. I think everyone who is eligible should have a roth ira regardless of their 401k and would actually argue that one should contribute only to the portion of their company's match in the 401k, then max out their Roth IRA and then increase their percentage in their 401k if sufficent funds are available.