What Is Liquid Cash?
Liquid cash or liquid assets are a type of asset that can be converted to cash quickly without taking a large impact to the value of the item. Liquid assets are considered to be almost as good as cash reserves because their prices are stable when sold.
For it to be considered a liquid asset, the potential market must be large enough to absorb the influx of product without significantly affecting the asset’s price. It must also be easy to transfer ownership between seller and buyer in order to be considered liquid.
There are many examples of liquid assets including bonds, stocks, money within a checking or savings account, tax refunds, mortgages, court settlements, certificates of deposits and trust funds. Collections, jewelry and real estate cannot be considered liquid assets due to the time it takes to sell them for their true value. While a stamp collection could be sold within hours to the right buyer, the speediness of the transaction is likely to result in a lower price being paid.
It is important to have liquid assets in order to cover an emergency situation, medical expenses or job loss. Because everyone is different, it is important to speak to a financial advisor to determine what types of assets should be kept available for emergencies.