For more detailed information see IRS Publication 550, Investment Income and Expenses. CDs may be purchased at no cost in a variety of denominations and can lock into a relatively high yield for periods of time ranging from 6 to 60 months, sometimes longer. If college is only a short time away, money market accounts may be a savings option for short term investing. They are offered by banks and savings institutions and are insured by the federal government. Banks and savings institutions may place restrictions on the number of times money can be withdrawn during a month.
Some money market accounts compound interest daily.
Interest is based upon current market rates and can change frequently. Traditionally the interest rate on money market accounts is lower than that on money market funds. Money Market Funds Money market funds are another option for short term investing. Unlike other savings and investment instruments, you are free to withdraw your money from these accounts at anytime. There is no charge to put money in or take it out.