Liquidity
How quickly and easily you can turn an asset into cash without losing value.
What Liquidity means
Liquidity describes how fast you can access the cash value of an asset. Cash in a checking account is fully liquid. A savings account is very liquid. Stocks can usually be sold within days, but a house can take months to sell and a term deposit may charge a penalty for early withdrawal. Your emergency fund should be highly liquid because it exists for urgent, unpredictable needs.
Example
If you need $800 at short notice, money in a savings account is ready within a day. Money locked in a 12-month certificate of deposit would cost you a penalty to reach early.
Related terms
Disclaimer
Definitions are simplified for educational use and are not personalized financial, investment, tax or legal advice.