If you dont have a large amount of cash — lets say $1,000 or more — moldering away in a savings account, then this article may not interest you. If you do have a large amount of cash saved up, then you may be wondering whether a savings account is the best place to keep it. Sure, its liquid, but the interest rates are only slightly better than those offered by your sock drawer and may be only slightly better than the inflation rate. One alternative is a money market mutual fund.

The main reason people use banks to hold their money isnt because of the lucrative returns from interest rates — it is because the bricks, sensors and a tempered steel safe convey a sense of security that a sock drawer cant match. On top of the physical security of a bank, there is the protection of the U.S. government. The Federal Deposit Insurance Corporation guarantees that the bank will not lose your money. The limit for this coverage applies for up to $250,000 per account, but will go down to $100,000 per depositor as of 2014.

On the other hand, money market mutual funds are safe in a different way. There is no backing from the federal government, but the SEC carefully hems in money market funds. They generally only invest in financially reliable securities and all the investments must have an average maturity of less than 120 days. This results in a lot of government issues (municipal, state, federal) — which are the safest debt instruments — that have a lower yield than the average market, but a better rate than your savings account.

For savings accounts, the two biggest fees are associated with a minimum balance requirement and transaction fees. Depending on the bank and the exact savings account, these fees vary, but they are usually not a problem for those with a large amount of money in a savings account.

For money market funds, there are several fees that investors should be aware of when contemplating an investment in this type of asset. The biggest is the expense ratio, which is a percentage fee charged on the fund for management expenses. For money market funds, these fees are typically very low, usually below 0.5%. Also, there may be balance requirements or transaction fees so make sure to carefully look over the fees associated with an investment with any fund you consider.

There is a range of funds to help you relieve the different types of tax burdens. If you find yourself in a high state tax bracket but a low federal tax bracket, you can invest in a U.S. Treasury money market fund, like the Vanguard Money Market Reserves U.S. Treasury Portfolio.

There are also funds that are federal and state tax-free like the Fidelity MA Muni Money Market Fund. The tax exemptions are based on what securities the fund invests in and whether they are local or federal debt issues. When we say tax-free in this case, we are referring to the dividends — there is no tax deduction for the money you put into the funds. With some research, you should be able to find a fund that will meet your tax needs.