For decades, folks have grown accustomed to viewing money market funds as "cash equivalents." Fact is, though, not all money funds are created equal. Some, in an effort to show a higher yield, have occasionally purchased IOUs that aren't quite as safe as you might like.

To protect yourself, I suggest that you deal with money fund sponsors known for both low fees and risk-averse, even stodgy, investment policies. (High fees — more than, say, 50 cents a year per $100 invested — may tempt a manager to justify them by taking excessive risk.)

My #1 money fund sponsor by these standards is Vanguard (800/662-7447), followed by American Century (800/345-2021) and T. Rowe Price (800/225-5132).

What about the government's new program to back money fund accounts? No doubt, it adds a layer of security. Recall, however, that the program ends April 30, unless the Treasury extends it. (See also: 5 Rules for Bear Market Investing)

Furthermore, the government backing only applies to the amount you had on deposit with the fund as of September 19, 2008. If you added to the account after that date, the excess doesn't qualify for coverage.

Take It To the Bank

Money funds are perfectly adequate for many purposes (such as holding the spare cash in your brokerage account). Nonetheless, in today's unsettled environment, I prefer to squirrel the majority of my cash in a place where people always used to stash cash — the bank.

If, by some mischance, the financial crisis should worsen, FDIC insurance would serve as a firewall to keep the payments system functioning. Imagine not being able to pay for groceries because your checks or your ATM card or your debit card stopped working! Chaos would ensue.

Rest assured, Uncle Sam won't let it happen. You can count on Congress to vote whatever funds the FDIC needs. Thus, I recommend opening as many bank accounts as you need to stay within the boundaries of FDIC insurance: $250,000 per depositor (under the new limits applicable through December 31, 2009), or $500,000 for joint accounts.

For ease of access, it's hard to beat bank money market deposit accounts (MMDAs).

You're allowed three penalty-free withdrawals per month, and many banks extend the limit to six per month if you withdraw money via an ATM card or other electronic transfer. Minimum deposit to open one of these accounts can range up to $2,500, although some banks will accept any amount.