Morning Finance Filling Word of the Day: Liquidity
- Chris Ridl
- Jul 31, 2023
- 1 min read
Liquidity
Liquid or Liquidity essentially refers to how easily you can convert an asset into cash. Having cash in your hand is the most liquid asset but checking and savings accounts are very close to the same liquidity. A house or piece of land is an asset that is not very liquid as it could take months for you to convert it to cash.
Liquidity Lesson: When saving and investing, liquidity is very important! Emergency fund money needs to be very liquid as you never know when you will need it. Money you don't need for 5-10+ years can be put into investments where liquidity is less important.
When saving and investing, bucket your savings into 0-1, 1-3/5, 5-10 and 10+ year buckets. The 0-1 year bucket should be in very liquid forms. Your 10+ year money can be placed in less liquid forms.
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