Financial Pros Answer Your Top Questions

Q: I keep my money in money market funds because I thought they were safer than the stock market. But now I'm hearing that money market funds are in trouble too. Should I take my money out?

Connie Stone, certified financial planner, Chagrin Falls, Ohio: "The amount you had in money market accounts as of Sept. 19, 2008, is insured. Some financial institutions (i.e. Vanguard) are considering adding another layer of insurance (Treasury guarantees) for their money market accounts. Yields on money markets are low compared with CDs. You might want to put some of your cash in 6-, 12- and 18-month CDs to increase the yield if you do not intend to use the money during those timeframes. Otherwise, your money should be safe in money market funds. Check with your financial institution to see if they're adding Treasury guarantees on money market accounts."

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Engle: "No. There is a new government effort to backstop money market funds. You should consider this question: 'To whom does my money market make 30 day loans?' Municipal money market funds make short-term loans to state and local governments. These governments get revenue from taxation, and can raise taxes if they have a shortfall. Muni funds are the second safest form of money market, after U.S. Treasury money market funds."

Winterhalter: "Most institutions try very hard to make sure money market account values do not go below $1 per share. It is suggested that you check with your financial institution to see what safeguards they have in place. Being knowledgeable about your finances will help you to make reasonable and educated financial decisions. Brokerage accounts carry SIPC (Securities Investors Protection Corporation) insurance, which covers you should your brokerage fail. It covers cash assets up to $100,000. Some companies purchase insurance above these limits to provide customers additional protection above the SIPC limits. Be sure to keep current copies of your statements."

Q: I keep hearing about credit unions. Is it safer to keep my money in a credit union instead of a commercial bank?

Winterhalter: "Both commercial banks and credit unions are insured financial institutions. Credit unions are insured by the National Credit Union Association. This independent federal agency is backed by the full faith and credit of the U.S. government. The NCUA operates the National credit Union Share Insurance Fund , which insures consumer deposits up to $100,000/depositor just like FDIC does. The NCUA Web site (www.ncua.gov) provides additional information and a great online calculator. "

Engle: "Both are equally safe. It's a matter of convenience for you. If the credit union offers higher interest rates, or is closer to your home or work, then by all means choose it. In any choice, consider the locations of the ATM machines and other convenience products, such as online banking, etc. Credit unions are sometimes nonprofit or affiliated with employers or groups you might support. That's another reason to consider a credit union."

Palazzo: "Credit unions provide a nonprofit alternative, but like all financial institutions they are subject to risks. Eleven credit unions and 13 banks have failed this year."

Adam Levin, chairman of Credit.com: "The answer depends on the particular institution that you are considering. Credit unions, for the most part, have shied away from the subprime market. Many local banks also have avoided the rush to capitalize on the subprime lending frenzy. Smaller institutions tend not to be saddled with crippling volumes of nonperforming loans."