If you think high-yield savings accounts offer juicy rates to park some cash, wait until you see what money-market funds are paying.

Yields paid by the typically staid mutual funds, which invest mostly in short-term government bonds, spiked from 0.02% earlier this year to more than 3.6% as of early December, according to Crane Data’s 100 money-market fund index. After this week’s rate increase by the Federal Reserve, money-market fund yields are poised to soar even higher.

Some funds, such as Allspring Money Market Fund, Goldman Sachs Investor Money Market Fund and JPMorgan Liquid Assets Money Market Fund, are already offering yields close to 4% or more.

That compares with a 3% average payout for a high-yield online savings account. Although that’s the highest in at least five years, banks haven’t exactly kept pace with the Fed’s interest-rate increases since May.

That’s because the rates offered by banks are ultimately at their discretion and influenced by factors other than the Fed’s moves. The biggest banks are still flush with pandemic cash so have barely budged from what they’re paying depositors on their savings accounts. (The average for all banks was 0.24% as of Nov. 21, according to the Federal Deposit Insurance Corp., but if you bank at say, Wells Fargo or Chase, you’re lucky if you get 0.02%.)

Online banks are more eager for customer deposits so have been more responsive at passing on the Fed’s rate increases to their customers. Still, given that money-market funds are investing mostly in Treasuries, their yields tend to move in lockstep with the Fed’s rate. “Money funds always give the market what the Fed gives them,” said Pete Crane, founder of Crane Data.

Money-market funds are often used to safeguard cash that could be needed on short notice, such as for a home down payment or an emergency fund, or as a holding spot between portfolio investments. Given the funds’ attractive yields, more investors should be giving them a second look.

Some already are. Money-market funds have been reeling in assets since April, hitting $4.72 trillion this month — close to the record high of $4.79 trillion in May 2020, according to the Investment Company Institute.

Remember though, money-market funds aren’t synonymous with bank accounts. They don’t have FDIC insurance, and there have been instances where assets have dipped below $1 a share, or “broke the buck,” and customers couldn’t get all their money back.

That’s less of an issue now after regulatory reforms adopted as a result of the fallout of the 2008 financial crisis. In addition, most money-market funds just hold government bonds that are backed by the full faith and credit of the US government. In the past, the funds that got into trouble invested in short-term corporate bonds.

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