In recent years, the money market account is growing in popularity as an additional way to invest and get the most out of your money. Though an ever-increasing number of people hold money market accounts, it may come as somewhat of a surprise how many of them actually have little or no idea what a money market account is supposed to be or how it generates the interest and dividends that are paid to their account balance.

If you've found yourself wondering about your own money market account, or if you've simply been debating getting one and would like to find out more about what makes them tick, then the information below should answer at least a few of the questions that you might have concerning these specialized investment accounts.

Defining money market accounts

Though the end result of a money market account is similar to that of a common savings or other interest-bearing account, the accounts arrive at this end by different means. Whereas a savings account simply pays interest on money that is deposited, a money market account takes the money within it and invests it in a variety of different bonds and short-term debts.

This means that money market accounts are mutual funds, which specialize in a variety of different bonds and debts instead of the more common stocks and indexes. The interest paid on these different debts enables money market funds to generally pay a higher interest rate than standard savings accounts, though there isn't the same guarantee against loss.

Because of the extremely short term of the investments that are made with money market accounts, however, the chance of loss is minimized since the prices of the debts invested in rarely fluctuate within that time.

How money market rates are determined

Because the money market account invests in a variety of different debts and bonds, the interest rate that is paid on the money that you have invested can fluctuate as the investments change. Any investment that is chosen for a money market account is carefully considered, since the administrators of the account want the price per