The Importance of Financial Liquidity

Liquidity is literally the difference between being financially flexible and financially stuck.

Meet Sarah, a 28-year-old teacher who learned this lesson the hard way.

She had 50,000 dollars invested in a five-year certificate of deposit earning 3 percent annually.

When her car broke down requiring 8,000 dollars in repairs, she faced early withdrawal penalties

of 2,500 dollars just to access her own money. Liquidity refers to how quickly you

can convert an asset into cash without losing significant value. High liquidity assets

include savings accounts, money market funds, and Treasury bills. Low liquidity assets

include real estate, CDs, and retirement accounts. Financial experts recommend keeping