DayCents

Liquidity

Liquidity is how quickly you can turn an asset into cash without losing value. Cash and a savings account are highly liquid; a home or a retirement account is not. Matching liquidity to when you'll need money is the core of deciding where to keep it.

An emergency fund lives in liquid accounts precisely because emergencies don't wait. Illiquid assets like real estate or a CD can pay more, but reaching them fast means selling at a loss or paying a penalty — the price of that extra yield.