What do you do when your money fund sprouts fangs?

— -- You bought that cute little puppy because it seemed so sweet. Ten months later, however, it weighs 250 pounds, dines on postmen and sneaks smokes behind the shed.

Clearly, the dog you bought is no longer the dog you own today. Investors probably feel the same about their money market mutual fund: The investment they bought for safety, liquidity and yield has proved questionable on all counts. If you own a money fund — and the odds are good that you do — what should you do?

For the most part, you should relax: Most money funds are OK. But you should consider other options, particularly if you're investing for a long-term goal.

Money funds were born in the 1970s, when the law forbade banks from paying more than 5% on interest-bearing accounts, even though other interest rates were soaring. Enter the money fund, which invests in short-term, high-quality interest-bearing securities, such as Treasury bills, and distributes the interest, minus expenses, to shareholders. Money funds had two big innovations. Share prices were kept at a constant $1 a share. And many funds allowed you to write checks on your account. For all intents and purposes, a money fund functioned similarly to an interest-bearing checking account.

Money funds were popular in the 1980s, when rates were high. But they continued to grow in assets even when short-term interest rates plunged. People simply liked a safe, easily accessible account to park their cash.

All of which utterly fell apart when the Reserve Primary fund allowed its share price to fall to 97 cents on Sept. 16. The fund suspended redemptions on Sept. 19, although Reserve says the fund's share price has returned to $1.

And Putnam Investments announced Sept. 18 that it would liquidate one of its institutional money funds. The fund was merged Wednesday into a larger fund run by Federated Investors, and all shareholders received $1 a share.

Alarmed by the run on money funds — the run was entirely by institutional investors — the Treasury announced that it would temporarily guarantee assets in money funds as of the end of business on Sept. 19. Money added after that date isn't covered. Details are still being worked out.

The average money fund now yields 1.8%, according to iMoneyNet. So the three main advantages of money funds — safety, liquidity and yield — seem to be questionable now.

If you're considering investing in a money fund now, you should ask yourself a few questions:

•Why am I doing this? If you're bailing out from the stock market, consider your investment goals. For example, if you're saving for retirement that's comfortably far away — 10 years or more — then you'd better boost your savings rate. At 1.8%, you'll double your money in about 40 years. Even in the past 10 wretched years, you would have been better in a stock fund than a low-risk investment such as a three-month T-bill.

•Who stands behind the fund? Money funds managed by large fund companies, such as Vanguard, Fidelity, Schwab and T. Rowe Price, would probably add their own cash to a fund rather than let its share price fall below $1.

•Can I do better elsewhere? Probably. Many banks offer short-term CDs that yield more than money funds. Until the money market settles down, conservative savers should probably stick with federally insured bank deposits.

Tax-free money funds now yield 3.67%, which seems tempting. But be wary. Those higher yields come, in part, because of turmoil in the tax-free money market. High yields, in the money market, are a warning sign, not a free lunch.

John Waggoner is a personal finance columnist for USA TODAY and author of 'Bailout: What the Rescue of Bear Stearns and the Credit Crisis Mean for Your Investments,' available Monday from John Wiley & Sons publishers. His Investing column appears Fridays. Click here for an index of Investing columns. His e-mail is jwaggoner@usatoday.com.