Easy access to cash is what savings is all about

When you have savings, how important is it to be able to access your money?

09:47 31 December 2013

The purpose of having a savings account is to keep money aside for everything from retirement to unplanned expenses and emergencies. When you are choosing an account, you need to think about how often you might be accessing this money. The ability to access the money in your account is called liquidity. The more liquid you are, the better.

Cash for example, has a high level of liquidity. Property on the other had would be considered something with low liquidity. Liquidity revolves around how easy it is to access the money. Cash is easy to access. Most savings accounts make it relatively easy to access your funds.

Owning a property can bring you cash as rental income however, if the property is vacant or if you need more money than your rental income would afford, you may try to sell the property and, it could take you a long time to obtain the money you require.

When looking into savings opportunities that are going to provide you with the liquidity you need, there are several different options and things to consider:

• High liquidity investments are less risky
• Easily accessible investments do not generate high returns
• Some savings options have fees and restrictions on removing money

When looking into savings options and investments designed to provide you with more money later on consider the liquidity of the account you are considering. How easy is it going to be for you to access your funds if you need them? What are the fees? How long is it going to take? Stocks and bonds, property, CDs, savings accounts, all of these are ways to save your money and have it grow but if you need your money quickly, which option is going to give you the balance of return and liquidity.