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// General
What Is Liquidity?
In short
How quickly and easily you can turn something into spendable cash without losing much of its value.
Cash is perfectly liquid. A savings account is nearly so. A graded card, a figure collection, or property is illiquid — real value, but slow to sell, and often at a discount if you need the money fast.
Liquidity is why an emergency fund lives in cash, not in investments or collectibles. When a surprise expense hits, you need money now, not a three-week sale at whatever price you can get.
For example
Two people can have the same net worth, but the one holding cash can cover a busted laptop today, while the one holding sealed product has to run a fire sale first.
Key points
- How fast an asset becomes usable cash.
- Cash is liquid; collectibles and property are not.
- Emergency money should always be highly liquid.
Put it to use
Learning the basics? Follow the whole path from saving to investing.