What Are Liquid Assets and How Can They Help Your Financial Savings Plans? | ETF Trends

By Darryl Smith via Iris.xyz

Building real wealth starts with a strong financial plan & smart investing. These investments should be comprised of a diversified portfolio designed to help you build long-term wealth. But what if you need money quickly? For most Canadians, up to 75% of their net worth is tied up in non-liquid assets like real estate, which can take time to sell.

While it’s possible to withdraw funds from your investment portfolio it is not the best choice, that is why it is so important to have liquid assets included in your financial plans.

What is a liquid asset?

Liquid assets can include “cash on hand” or assets that can easily be converted to cash and are readily accessible. For an asset to be deemed “liquid” it must be in an established market with a large number of potential buyers AND have ownership that is easily transferable.

What is considered a liquid asset?


Everyone has heard the expression “Cash is king”. This was true long before technology like debit & credit cards existed, and still stands true today. I always recommend that my clients have some cash at home (securely stored of course), on their person and in their bank accounts to cover all the bases. Debit machines and computers do go down on occasion, so it’s important to ensure you enough cash to cover any unexpected emergencies. Further, it’s recommended to have approximately 3 months’ worth of bill expenses in your bill paying bank account and 3 months’ worth of salary or wages in a high interest bank account to make sure you’re supported should you find yourself without work.

Precious Metals and Jewelry

Assets like gold, silver and jewelry can be converted into cash quite quickly. However, they may be sold at a discount and be subject to fees.

Investment Accounts

Other liquid assets which can be made available, although not always recommended, is the cash in your investment portfolios such as RRSPs, TFSAs and Non-Registered accounts. This would be for extreme emergencies only, as withdrawing funds early from locked-in accounts means they may be subject to taxes and fees, and you would also be losing all future growth of the assets that are withdrawn. This is referred to as a lost opportunity costs.

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