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Question 12

Liquidity is a core concept for emergency planning. It describes how quickly and cheaply you can convert an asset to cash when you need it. Highly liquid assets — like cash in a checking or savings account — can be accessed immediately without loss of principal. Less liquid assets — such as real estate, certain bonds, or retirement accounts — can take time to sell or may incur penalties or price discounts if sold quickly. For emergency funds, liquidity matters more than yield because the primary goal is access under stress, not maximizing return.

Which phrase best defines “liquidity” in personal finance?

Did You Also Know...

By Wise Wallet

Where you hold your money matters—deposits at insured institutions have protection up to standard insurance limits.