Reserve funds help community associations and homeowners associations (HOAs) cover future expenses such as capital improvements or non routine repairs. Rather than letting these funds sit idle, the board can put them in a money market account to earn interest while maintaining access to the association’s funds. An HOA money market account is a deposit account used by community associations to hold reserve funds while earning interest and maintaining liquidity.

Use the guide below to discover the value that an HOA money market account (MMA) can bring to your association’s reserve funds

How can money market accounts benefit community and homeowners associations?

Money market accounts can help community associations and HOAs manage their reserve funds more effectively by keeping reserve and operating funds separate. Unlike certificates of deposit (CDs), these accounts typically offer more liquidity, allowing boards to access funds without disrupting long-term planning. This balance of accessibility and stability supports an HOA’s fiduciary responsibility to protect member funds.

Money market accounts are interest-bearing accounts that allow an association’s reserve funds to earn a competitive rate. These accounts often have higher interest rates than traditional savings accounts, and tiered interest rates also unlock a higher return on investment, given that an HOA’s reserve fund tends to be larger than what your average individual money market account holder might have at their disposal.
Funds held in a money market account are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per account, similar to a checking or savings account. Although most banks limit the number of penalty-free withdrawals per statement period, community associations can plan ahead to help avoid unnecessary fees.

Funds held in a money market account are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per account, similar to a checking or savings account. Although most banks limit the number of penalty-free withdrawals per statement period, community associations can plan ahead to help avoid unnecessary fees.

How to open an HOA money market account.

Opening an association bank account requires gathering the appropriate legal documents to share with the bank and ensuring transparency with homeowners. Before opening the account, community association board members should consult the bylaws and communicate the plan to residents. The steps below outline how to open an HOA money market account.

1. Evaluate the role of the HOA money market account in managing reserve funds

Determine how much of the reserve funds will be placed within the association’s money market account. Clarify when board members or the treasurer may access funds. It may also be helpful to establish future goals for the reserve fund and interest earnings.

2. Research and compare available money market accounts

Explore different money market account options and review how each one aligns with the association’s financial goals. Compare features, benefits, and potential drawbacks to help identify which accounts support your needs, both present and future.

3. Gather necessary documents

Review the application requirements for the money market account you want to open. Gather any necessary documents, such as the bylaws and other governing documents, the association’s Employer Identification Number (EIN), applicable board meeting minutes, authorized signers, and any other paperwork required. Meet with a Relationship Manager to open the account after deciding who from the HOA will be involved in managing the account.

4. Fund and maintain the account

Meet the minimum opening balance requirements for the money market account and make a plan for ongoing contributions. Review account activity and performance at routine board meetings to ensure the account continues to support the association’s financial strategy.

What to look for in an HOA money market account.

Reviewing only the numbers advertised with money market accounts can lead to a misalignment between the HOA’s financial goals and the account’s characteristics. However, evaluating potential money market accounts through the lens of the following features can help HOAs make a more informed decision:

• Account terms and conditions: Review the fine print to understand any withdrawal restrictions, transaction limits, or requirements necessary to maintain the advertised interest rate.
• Interest rates: Compare both introductory and ongoing rates, and note whether they’re fixed, variable, or change on a set schedule.
• Applicable fees: Identify any monthly maintenance fees, transaction fees, or penalties that could reduce earnings.
• Minimum balance requirements: Note the minimum opening deposit and any continuing balance thresholds necessary for avoiding penalties.
• Accessibility: Consider how easy it is to access funds via checks, electronic transfers, or in-person withdrawals. Also, determine if the account can be managed online or through a mobile app.
• FDIC insurance: Most banks offer this insurance—up to $250,000 per account—but it’s a good rule of thumb to confirm it’s included.

The best money market accounts also offer superior customer service and ongoing account support. Keep these factors in mind when comparing accounts to find the best option for your HOA or community association.

HOA money market account best practices

Once the account is opened, it should be managed using the same standards and procedures of all HOA funds. For instance, the treasurer typically oversees the account and money management, but the board should maintain shared responsibility. Additional best practices include:

• Using reserve funds only when approved by the bylaws, homeowners, and the board
• Reviewing accounts annually to ensure the association is benefitting from competitive rates and reliable customer service
• Ensuring the account meets requirements to avoid fees, such as maintaining minimum balances or limiting withdrawals per statement period
• Conducting regular audits to reduce the risk of fraud

Maximize the potential of your reserve funds

Community associations of all types—HOAs, condos, and co-ops—can benefit from careful reserve fund planning. Working with a banker who understands the needs of community associations can help you identify options that will support long-term financial stability. Contact Popular Association Banking today to learn more about how a money market account may support your association’s goals.