One of the primary risks associated with money market accounts is the risk of inflation.
The pace of widespread price increases for goods and services is known as inflation.
If the interest rate on a money market account is not keeping up with the rate of inflation, the purchasing power of the money in the account will be eroded over time.
This means that the real value of the money in the account will be decreasing, even if the account balance appears to be growing.
Another risk associated with money market accounts is liquidity risk.
If an asset can be swiftly and readily changed into cash without suffering a major loss in value, such asset is said to be liquid.
Since the funds in money market accounts can usually be accessed quickly and readily, they are typically thought of as being liquid.
The number of withdrawals or transfers that may be made from various money market accounts each month, nevertheless, may be limited.