![]() Saving cashįrom a corporate point of view, companies need to maintain certain levels of liquidity to meet short-term obligations. That’s why liquidity is important to individuals and families. You don’t want to be one of those statistics. Less than half of US adults say they don’t have a rainy day fund, while around one in five admit to spending more than they’re earning. Unfortunately, the numbers say most of us aren’t prepared for these kinds of expenses. You’re going to need quick access to liquid cash so that you can pay for the crisis at hand while still staying on top of all your other household bills and keeping afloat. When life comes knocking, it doesn’t matter whether you’re living on the breadline or a billionaire. Think about it: if your boiler breaks down, you run into a huge medical emergency, or your car gets totaled, you’re not exactly going to have time to auction off your family heirlooms or get your house onto the market to address the emergency at hand. In terms of your personal finances, having access to liquidity is incredibly important in case you run into a financial emergency. All of a company’s liquid assets will form what accountants call its “current assets,” which also includes things like inventory and accounts receivable. Companies that own assets will normally consider anything they’re expecting to convert into cash within 12 months as a liquid asset. Liquidity can apply to your personal and company finances. They must also be totally secure - and it’s worth noting that the amount of time to cash conversion can vary depending on the asset type or market. Ownership transfers have to be easy to facilitate. To qualify as a liquid asset, a cash equivalent needs to be in an established, liquid market with a number of readily available buyers. Those assets are often referred to as “cash equivalents” because they can be sold or exchanged for cash so quickly that it’s practically like the real thing. What are liquid assets?īefore we speed right into how you can invest in liquid assets, let’s pump the brakes and talk about what liquid assets actually are.Ī liquid asset is cash that you have on hand or an asset that you can easily convert into cash. This guide explains what liquid assets are, the types of assets that count as liquid, how liquid assets are different from non-liquid assets, and how you can invest in and store liquid assets. There is a pretty wide range of liquid assets you can invest in, and each type goes hand-in-hand with its own set of pros and cons.īut if you’re new to liquidity, don’t stress. Liquid assets are the cash or cash equivalents you can spend at the drop of a hat if you ever need to. As a result, it’s absolutely critical you have something to fall back on in case of an emergency. Living costs are shooting up, inflation is rising, and wages aren’t necessarily keeping pace with those rising costs. We’re living in some pretty turbulent times where money is concerned. ![]()
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