Liquid Assets

A liquid asset has four basic features. It is an item that can be sold anywhere quickly with no advertising cost and a low transaction cost. The most common liquid asset is cash, the national currency of an individual's country of residence. When a person speaks of maintaining a portion of their assets as "liquid" they generally mean that they have a degree of cash on hand that can be accessed quickly and used for emergencies.

By the same token when an individual says their money is "tied up," the phrase is a reference to assets in property or securities that may not be so easy to dispose of in exchange for liquid, usable assets like cash. Typically as an aspect of debt reduction the debtor is called upon to "liquidate" their holdings to gain the necessary cash to begin paying creditors. It is also common in debt reduction plans for individuals to live on a "cash basis" until their debts are resolved.

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