After a tumultuous week, a classic safe harbor for investors -- money-market mutual funds -- is looking safe again.

In a move designed to halt massive redemptions from the funds, the Treasury on Friday offered to insure the holdings of eligible publicly offered money-market mutual funds. The run on money funds was touched off last week with problems at Reserve Primary Fund, which saw its price fall below the time-honored $1 a share due to holdings of soured Lehman Brothers Holdings securities.

Still, with all the uncertainty in the sector, some people may prefer bank accounts, which already have federal insurance backing.

'Breaking the Buck'

Money funds are mutual funds that buy high-rated short-term debt instruments. They strive to maintain an unchanging $1 share price and have almost always succeeded. But last week, the Reserve fund, one of the oldest money funds, saw its share price slide to $0.97 as Lehman securities in its portfolio lost value and investors pulled their money out.

In industry parlance, that's called "breaking the buck."

In response, other fund companies including Vanguard Group, American Century Investments and Charles Schwab posted notices on their Web sites assuring investors that none of their money funds hold any securities issued by Lehman or by insurer American International Group.

In the past, while the risk of losing money in a money fund was considered miniscule, money funds at large asset-management companies were generally considered the safest. That's because the companies have the resources and the deep pockets to buy any bad securities from the funds.

In contrast, New York-based Reserve Management primarily runs money funds and isn't part of a larger company.

Twenty fund firms in the past 13 months have stepped in to bolster their money funds in some way, according to Crane Data, which tracks money funds. That has happened in previous years as well, when some money-fund holdings went bad.

Bank Options

Savers can also opt for a high-yielding bank money-market deposit account or savings account. The top-yielding accounts, for example, are over 3.5%, compared with top yields of about 2.5% for some taxable money funds, Mr. McBride says.

Bank deposits are insured by the Federal Deposit Insurance Corp. up to specified limits. The basic rule is that the FDIC covers deposits up to $100,000 per person, per insured institution.

For years, savers with larger sums have gotten around the FDIC's $100,000 limit by spreading their cash across multiple institutions. But you also get additional coverage within a single bank for retirement accounts and for other accounts that are titled differently, such as a joint account or an account designated "payable on death."

Buying multiple certificates of deposit through a brokerage firm is a fast way to spread out money across different institutions, capturing the full FDIC protection.

Another option is the deposit placement service called CDARS, short for Certificate of Deposit Account Registry Service.

Customers deposit their money with a participating bank, and CDARS disperses the deposit in individual CDs up to $100,000 in member banks across the country.

Write to Jane J. Kim at