HYSA vs Money Market Fund (October 2026): 3.85% Savings vs 3.79% VMFXX
Written & reviewed by Hans Goldstein, EA, independent licensed insurance producer · CA license 4273294 · NPN 20602398Admitted to practice before the IRS
Yields checked on bank and fund-company sites October 2 to 3, 2026 · Reviewed
Short answer
Right now they pay about the same. The best big-name savings accounts paid 3.50% to 3.85% APY in early October 2026 (Sallie Mae 3.85%, Synchrony 3.55%, Marcus 3.50%), while Vanguard's VMFXX showed a 3.79% 7-day SEC yield, VUSXX 3.82%, Schwab's SWVXX 3.71% and Fidelity's SPAXX 3.49% (all October 2, 2026). The real differences are insurance (FDIC vs none), state tax (Treasury income in a fund can be state-exempt) and where the cash sits (bank vs brokerage).
Savings account vs MYGA, after tax
What $100,000 earns in 5 years: savings account vs MYGA, after tax
Rates used: Savings account 4.00%, the top online savings rate we tracked (bank sites, September 24, 2026); savings rates can change any day; change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| Savings account, interest taxed every year | $116,604 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the savings account, after tax | $9,531 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. Bank and credit union deposits are FDIC or NCUA insured up to the limits; a MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
Yields side by side
| Account | Type | Yield | As of |
|---|---|---|---|
| Sallie Mae High-Yield Savings | Bank deposit, FDIC | 3.85% APY | read Oct 3, 2026 (bank dates it 10/05/2026) |
| Synchrony High Yield Savings | Bank deposit, FDIC | 3.55% APY | Oct 3, 2026 |
| Marcus Online Savings | Bank deposit, FDIC | 3.50% APY | Oct 3, 2026 |
| Ally Bank Savings | Bank deposit, FDIC | 3.10% APY | Oct 3, 2026 |
| Vanguard Treasury Money Market (VUSXX) | Treasury money fund | 3.82% 7-day SEC yield | Oct 2, 2026 |
| Vanguard Federal Money Market (VMFXX) | Government money fund | 3.79% 7-day SEC yield | Oct 2, 2026 |
| Schwab Prime Advantage Money Fund (SWVXX) | Prime money fund | 3.71% 7-day yield | Oct 2, 2026 |
| Fidelity Government Money Market (SPAXX) | Government money fund | 3.49% 7-day yield | Oct 2, 2026 |
| FDIC national average, savings | Bank deposit | 0.37% APY | Sept 21, 2026 |
VMFXX vs HYSA: which is better?
On rate they are within a few hundredths: VMFXX's 3.79% 7-day SEC yield (October 2, 2026) against 3.85% at Sallie Mae and 3.50% to 3.55% at Marcus and Synchrony. VMFXX is the usual cash home inside a Vanguard brokerage account, with a 0.11% expense ratio and a $3,000 minimum to buy it directly; a savings account is FDIC-insured and moves to checking more easily. In a high-tax state, VMFXX's Treasury share can tip the after-tax result its way; in a no-tax state, the higher savings APY wins.
Is there a Vanguard HYSA?
Not in the bank sense. Cash in a Vanguard brokerage account normally sits in a money market fund such as VMFXX, which is an investment, not an FDIC-insured deposit. If you want Vanguard's highest money-fund yield, VUSXX (Treasury, 3.82% 7-day SEC yield, 0.07% expense ratio, October 2, 2026) is the comparison; see the VMFXX review and VUSXX review.
SPAXX vs HYSA
SPAXX, Fidelity's default core cash fund, yielded 3.49% (7-day, October 2, 2026) after a 0.42% expense ratio, so most top savings accounts paid more. Inside Fidelity, FDRXX (3.56%) and FZDXX (3.68%, $100,000 minimum) paid more the same day. See SPAXX vs FDRXX.
From my desk: Hans Goldstein, licensed insurance producer (NPN 20602398)
Retirees often have both without deciding to: a savings account at the bank and a money fund sitting as the cash sweep in a brokerage or IRA. The first thing I check is how much is in each and why. Cash that drifted into a sweep fund at 3.49% can usually earn a bit more in the same account just by choosing a different fund.
The second is the state-tax line on the 1099. In California, where I work, a Treasury fund's state-exempt share is worth real money on a large balance; in Florida or Texas it is worth nothing.
Example ($100,000, 32% federal, 9.3% California, illustration): savings at 3.85% nets about 2.26%; a Treasury fund at 3.82% with fully state-exempt income would net about 2.60%, roughly $340 a year more. For money that will sit three to five years, both float; a 5-year MYGA (about 5.50% to 6.05% from A-rated insurers, public carrier rate sheets, October 14, 2026) fixes the rate and defers the tax, guaranteed by the issuing insurer and backed by its claims-paying ability, with surrender charges.
The legal difference
| High-yield savings | Money market fund | |
|---|---|---|
| What it is | A bank deposit | A mutual fund holding short-term debt |
| Protection | FDIC, $250,000 per depositor, per bank, per ownership category | None against losses; SIPC covers a failed brokerage, not investment losses |
| Share price | Not applicable; principal is the balance | Managed to $1.00, not guaranteed |
| Costs | Built into the rate | Expense ratio taken out of the yield (SPAXX 0.42%, SWVXX 0.34% net) |
| Federal tax | Ordinary income every year | Dividends taxed as ordinary income every year |
| State tax | Fully taxable | Treasury-sourced share may be exempt; repo and other income taxable |
| Where it lives | At the bank | In a brokerage account (often the cash sweep) |
Correction: earlier versions of this page called SWVXX the Schwab Government Money Market Fund. Schwab now lists SWVXX as Schwab Prime Advantage Money Fund, a prime fund.
Rates expire like milk.
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After-tax example: $100,000, 32% federal and 9.3% California
| Option | Yield | Net after tax | Assumption |
|---|---|---|---|
| Sallie Mae savings | 3.85% | 2.26% | Fully taxed federal and state |
| VMFXX, no state exemption | 3.79% | 2.22% | If none of the income were Treasury-sourced |
| VMFXX, half state-exempt | 3.79% | 2.40% | Illustration only; the real share is published by Vanguard each tax year |
| VUSXX, fully state-exempt | 3.82% | 2.60% | Illustration: a Treasury fund whose income were 100% state-exempt |
| SPAXX, no state exemption | 3.49% | 2.05% | If none of the income were Treasury-sourced |
In a state with no income tax the state exemption is worth nothing, and the higher savings rate wins outright. In a high-tax state the fund's Treasury share can close or reverse a small gap.
Which to use
- Emergency fund at a bank: a high-yield savings account. FDIC insurance and transfers to checking.
- Cash inside a brokerage account: a money market fund, usually the sweep fund.
- High state tax and a lot of cash: compare a Treasury-heavy fund after tax.
- Money you will not touch for 3 to 5 years: neither. Both float with short-term rates. On September 16, 2026 the Federal Reserve raised its federal funds target range by 0.25 point to 3.75% to 4.00% (effective September 17), after 1.75 points of cuts between September 2024 and December 2025.
Sallie Mae savings vs. a 5-year MYGA
Savings is the right home for emergency money. For money you will not touch for three to five years, a multi-year guaranteed annuity fixes a higher rate and defers the tax.
| $250,000 for 5 years | Sallie Mae savings (if 3.85% held) | 5-yr MYGA at 5.50% |
|---|---|---|
| Rate | 3.85% APY, variable | 5.50%, fixed for the term |
| Tax on interest | Every year (1099-INT) | Deferred until withdrawn |
| Value after 5 years, after 24% federal tax | ~$288,800 | ~$308,300 (tax paid at the end) |
| Protection | FDIC, $250,000 per depositor, per ownership category | Insurer claims-paying ability + state guaranty association (limits vary by state) |
| Getting money out | Any time | Surrender charge above the free-withdrawal amount; IRS 10% penalty before 59½ |
About $19,500 more after tax on the MYGA if the savings rate held all five years (24% federal bracket, state tax ignored). Savings rates are not fixed, so the real gap depends on where they go. Fixed annuity benchmark: carriers rated A or better topped out around 5.50% to 6.05% on 5-year compound-interest MYGAs, per public carrier rate sheets, October 14, 2026. Rates vary by state, premium and carrier.
Annuity vs CD · Current MYGA rates · HYSA or MYGA for 3-year money
Related: SPAXX review · VUSXX review · Best HYSA rates
HYSA vs money market fund: FAQ
Which pays more right now, a high-yield savings account or a money market fund?
It is close. In early October 2026 Sallie Mae High-Yield Savings paid 3.85% APY and Marcus 3.50%, while Vanguard Federal Money Market (VMFXX) showed a 3.79% 7-day SEC yield, VUSXX 3.82%, Schwab Prime Advantage Money Fund (SWVXX) 3.71% and Fidelity Government Money Market (SPAXX) 3.49% (all October 2, 2026).
Is a money market fund FDIC insured?
No. A money market fund is a mutual fund. It aims to hold a $1.00 share price but can lose money. SIPC protects against a brokerage firm failing, not against investment losses. A high-yield savings account is a bank deposit insured by the FDIC up to $250,000 per depositor, per bank, per ownership category.
Is a money market fund the same as a money market account?
No. A money market account is a bank deposit (FDIC-insured); Sallie Mae's paid 3.60% APY (salliemae.com, read October 3, 2026). A money market fund is an investment sold by a fund company.
Are money market fund dividends exempt from state tax?
Only the part that comes from U.S. Treasury obligations, and only in states that exempt it. Government funds hold Treasuries and repurchase agreements; the repo income is generally taxable. Each fund publishes its Treasury percentage for the tax year. Savings interest is fully taxable by the state.
What is SWVXX now?
Schwab lists SWVXX as Schwab Prime Advantage Money Fund (Investor Shares), a prime fund, with a 0.34% net expense ratio and no minimum. It is not a government fund.
Savings, money market fund, or a MYGA for longer-term money?
Both savings accounts and money funds float with short-term rates and are taxed every year. For money you will not touch for three to five years, insurers rated A or better paid roughly 5.50% to 6.05% on 5-year MYGAs on October 14, 2026, fixed and tax-deferred.
Is VMFXX safer than a high-yield savings account?
No. VMFXX is a government money market fund that seeks a stable $1.00 share price but is not FDIC-insured and can lose money. A high-yield savings account is an FDIC-insured bank deposit up to $250,000 per depositor, per bank, per ownership category.
How a Treasury fund can beat a higher-yielding prime fund after state tax is shown in SNSXX vs SWVXX after state tax.
My take
In September 2026 the yields are within a few tenths of a point. Choose savings for FDIC insurance and bank access, a money fund for brokerage cash or state-tax savings, and a fixed product for money with a multi-year horizon.
Hans Goldstein is an independent licensed insurance producer (CA license 4273294, NPN 20602398) and is not affiliated with any bank or fund company named here. Rates are copied from the sources named, as of the date shown; savings rates are variable and can change the day after you read this. MYGA figures are illustrations, not quotes.
Run the MYGA vs cash math for your situation
Talk to Hans Goldstein, a licensed independent insurance producer.
Savings and money funds float. A-rated 5-year MYGAs were paying about 5.50% to 6.05% on October 14, 2026, fixed for the term and tax-deferred.
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Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers
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Disclosure
This review is based on the carrier's public product materials and rates as of the date shown above. HYSA APYs are variable and change frequently. Confirm current values directly with the bank before opening an account. FDIC insurance covers up to $250,000 per depositor, per insured bank, per ownership category. MYGA rates referenced are illustrative top-of-market quotes as of 2026 and depend on state, carrier appointment, and product approval; not all MYGAs are available in every state. This is general education, not a personal recommendation or an offer of any product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) appointed with multiple A-rated carriers across the annuity market; Hans is not a banking representative and does not earn compensation on HYSA or CD products. Tax discussion reflects federal law as of 2026 and is subject to change. State tax treatment varies. Always read the actual bank disclosure and consult a licensed advisor or CPA before reallocating retirement-bound funds.