Liquid Asset

Sam · Posted: Fri Apr 09, 2004 12:27 am Post subject: Liquid Asset

Liquid assets include funds that are in the form of cash or which you can easily convert into cash. Such assets include demand deposits, time and savings deposits and investments which can be easily converted into cash without any loss.

Liquid assets include the following elements.

Cash at hand.
Shares and debentures.
Term deposits.
Money in trust funds, bank accounts including mortgage offset accounts.
Amounts deposited in financial institutions which can be withdrawn or paid off as soon as possible.
Assets provided to son and daughters.

The components given below do not form a part of the liquid assets.

Superannuation and termination payments that are rolled over from your employer.
Sale proceeds of your principal residence under certain circumstances.
Voluntary one off payments of your non-housing debts.

Reasons for keeping liquid assets are:

You should keep cash reserves even if you don't own any investments. It helps you to cope up with loss in income and circumstances which may prevent you from reporting to work. Maintaining liquid assets also help you to manage your expenses in times of financial crunch.

Level of liquidity

The level of liquid assets that you should keep at hand depends on your estimated monthly expenses. The quantity of such liquid assets should be such that you can support your family for at least 1 to 2 months. Most financial advisors are of the opinion that you should maintain cash reserves that can help you manage your expenses for at least 6 months and serve your purpose in times of emergencies.

You can be exempted from the liquid assets waiting period because of the following reasons:

Either you or your partner has been subjected to a liquid assets waiting period that started within the past 1 year.
You have transferred from one payment to another within a time frame of 14 days.
You have claimed a payment after the liquid assets waiting period has expired.
You are undertaking a rehabilitation program.

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