Money market funds are not federally insured.

That’s an important point to keep in mind if you have money invested in any of them, because money market mutual funds are now at center stage in the current financial crisis.

Their role is so important — they hold more than $3 trillion — that the U.S. Treasury last week put in place a “temporary guaranty program” to backstop money market mutual funds.

But look a little bit more closely at the guarantee: It’s in effect for only one year.

After that, the guarantee disappears.

If you have money in one or more of these funds, should you cash out?

Not necessarily, said Robert E. Veasey Jr., a director of the Rhode Island chapter of the Financial Planning Association, a trade group for financial planners and others.

Money market mutual funds — sometimes called money market funds, or money funds — have been around since 1971.

They’ve had occasional problems, but they’re considered pretty safe overall.

Still, they are not money market accounts, which are federally insured and offered through banks and credit unions.

You probably know that if you have money in such funds. But you probably never thought that there’d be any trouble.

Well, now there is. Here’s why:

The funds pool money from investors. The funds then typically use your money to invest in short-term, high-grade, fixed-income securities.

For instance, a fund may use your money to make short-term loans to big corporations, loans that are sometimes referred to as “commercial paper.”

Like other mutual funds, money market mutual funds are investments, not deposits. So their value can go up or down.

However, with a regular mutual fund, the net value of a share can rise and fall.

With a money market mutual fund, the value of a share is supposed to remain stable, at $1.

So if all goes well, you should always be able to get a dollar back for every dollar you invest. In the meantime, your investment pays you interest (in the form of dividends).

It’s rare for shares in a money fund to fall below that $1 per share threshold.

But it happened last week, with the Reserve Primary Fund, run by Reserve Management Corp., mainly because it held investments in short-term bonds that had been issued by Lehman Brothers Holdings.

(Lehman, you’ll recall, is the big Wall Street investment company that was forced into bankruptcy proceedings, helping to trigger the current financial crisis.)

Then Putnam Investments closed one of its money funds (which was only for big institutions, not retail clients) because customers were pulling money out at a hefty clip.

These and some related developments were evidence that the current financial crisis had spread to the money market mutual fund industry.

And that’s why President Bush on Friday authorized the Treasury to make available up to $50 billion for the industry, under a special program that has its roots in the Great Depression.

Why? Because money funds are important for individual and institutional investors, the Treasury said.

“Maintaining confidence in the money market fund industry is critical to protecting the integrity and stability of the global financial system,” the Treasury said.

But the funds have also been swept up in the crisis. “Concerns about the net asset value of money market funds falling below $1 have exacerbated global financial market turmoil and caused severe liquidity strains in world markets,” the Treasury said.

“In turn, these pressures have caused a spike in some short-term interest and funding rates, and significantly heightened volatility in exchange markets,” according to the Treasury.

Without the federal guarantee, “There is a substantial risk of further heightened global instability,” the Treasury said.

The federal program will step in, providing a kind of insurance, if the net asset value of a fund — whether it’s a taxable or tax-exempt money fund — falls below $1.

The guarantee “should enhance market confidence and alleviate investors’ concerns about the ability for money market mutual funds to absorb a loss,” the Treasury said.

But there are some additional points you should know. First, the guarantee is only for amounts you held in your fund as of the close of business on Friday, Sept. 19.

Also, the guarantee program is supposed to be in effect only for a year.

So if your fund runs into trouble, will the guarantee program provide support only for money you invested on or before Sept. 19? What about money you invest after that?

The answers to these and similar questions aren’t clear. The Treasury promises to provide more details about the program “in the coming days.”

What to do in the meantime? Keep in mind that money funds, overall, have a good track record.

Before last week, only one money fund — the Community Bankers fund, which was only for institutions — recorded a drop below $1 in its share value. And the fund eventually wound up paying its investors 96 percent of their principal, according to the Investment Company Institute, a trade group for the mutual-fund industry.

Still, some money-fund investors are anxious, mainly because of the financial crisis. One day last week, for example, investors withdrew $79 billion from money funds, according to Crane Data LLC, publisher of the Money Fund Intelligence newsletter. (Most of those withdrawals, though, were by big financial institutions.)

If you’re nervous, but want to stick with money funds, you can arrange to have your money placed in a fund that invests only in short-term securities issued by the U.S. government.

Most fund complexes offer at least one such U.S. government money fund, said Veasey, principal at Veasey Financial Advisors, a financial-planning firm in Providence.

If you want to play really safe when it comes to a short-term parking place for your cash, use a federally insured account, such as a money market account at a federally insured bank or credit union, he said.

“I think that’s the safest thing you can do,” Veasey said.

(Keep in mind that, by state law, all banks and credit unions that accept deposits in Rhode Island must carry federal deposit insurance.)

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