1) What is a high-yield savings account (HYSA)?
A high-yield savings account is a savings account that typically pays a higher interest rate than a traditional savings account. Rates are usually variable and often move with broader rate changes in the economy. [Source](https://www.fidelity.com/learning-center/investment-products/money-market-vs-savings-account)
A big reason people like HYSAs is the bank-style safety framework—FDIC insurance can apply when the account is held at an FDIC-insured bank (subject to coverage rules and limits). [Source](https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance)
2) What is a money market fund?
A money market fund is a type of mutual fund that invests in liquid, short-term debt securities, cash, and cash equivalents. They’re often used as a place to hold cash inside brokerage accounts and can pay dividends that generally reflect short-term interest rates. [Source](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-12)
Important: Money market funds are not FDIC-insured the way bank deposit accounts are. [Source](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-12)
3) HYSA vs. Money Market Fund: Key Differences
| Feature | HYSA (bank savings) | Money Market Fund (mutual fund) |
|---|---|---|
| What it is | Savings account at a bank/credit union [Source](https://www.fidelity.com/learning-center/investment-products/money-market-vs-savings-account) | Mutual fund investing in short-term instruments [Source](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-12) |
| Insurance | FDIC insurance up to coverage limits, if FDIC-insured bank [Source](https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance) | Not FDIC-insured [Source](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-12) |
| Yield behavior | Variable; can change as banks reprice deposits [Source](https://www.fidelity.com/learning-center/investment-products/money-market-vs-savings-account) | Dividend yield changes over time and generally reflects short-term rates [Source](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-12) |
| Best for | Emergency fund and near-term goals when you want deposit insurance | Cash in a brokerage when you want liquidity + competitive yields and can accept non-FDIC structure |
4) How to choose (simple checklist)
Choose an HYSA if you want:
- Deposit insurance protections under FDIC rules and limits. [Source](https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance)
- A straightforward “park cash and earn interest” setup that feels like traditional banking.
- A dedicated home for your emergency fund that’s separate from investing.
Choose a money market fund if you want:
- Cash held inside a brokerage account with money-market fund mechanics and dividends that generally move with short-term rates. [Source](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-12)
- Convenience: “cash parking” alongside your investments (common for brokerage users). [Source](https://www.fidelity.com/learning-center/investment-products/money-market-vs-savings-account)
- To understand and accept that it’s not FDIC-insured. [Source](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-12)
2026 angle: If rates keep easing, many cash yields may drift down. Consider whether you value locking anything in, or simply want flexibility while rates adjust. [Source](https://www.fidelity.com/learning-center/personal-finance/2026-money-trends)
5) Bonus: Where Treasury bills (T-bills) fit in
T-bills are short-term U.S. Treasury securities sold at a discount (or par), and you receive face value at maturity. Terms commonly range from 4 to 52 weeks, and interest is effectively the difference between purchase price and face value at maturity. [Source](https://www.treasurydirect.gov/marketable-securities/treasury-bills/)
T-bills can be useful for near-term goals if you can match your cash need to a maturity date (and you’re okay with tying up the funds until then). [Source](https://www.treasurydirect.gov/marketable-securities/treasury-bills/)
6) Tax notes & reporting basics (plain English)
In general, interest that is credited to an account and available to you is taxable in the year it becomes available, and you must report taxable and tax-exempt interest even if you don’t receive a form. [Source](https://www.irs.gov/taxtopics/tc403)
Also, some interest (including interest income from Treasury bills, notes, and bonds) is subject to federal income tax but exempt from state and local income taxes. [Source](https://www.irs.gov/taxtopics/tc403)
Sources
- Fidelity — 2026 money trends (rates, AI, tax changes): https://www.fidelity.com/learning-center/personal-finance/2026-money-trends
- FDIC — Understanding deposit insurance and coverage: https://www.fdic.gov/resources/deposit-insurance/understanding-deposit-insurance
- Investor.gov (SEC) — Money market funds investor bulletin: https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-12
- TreasuryDirect — Treasury bills overview: https://www.treasurydirect.gov/marketable-securities/treasury-bills/
- IRS — Topic 403 (Interest received): https://www.irs.gov/taxtopics/tc403
- Federal Reserve — Policy rate (federal funds rate explainer): https://www.federalreserve.gov/economy-at-a-glance-policy-rate.htm
- Pexels image used above: https://www.pexels.com/photo/woman-calculating-money-and-receipts-using-a-calculator-5900228/