Which is more liquid, a certificate of deposit or a savings account?

Which is more liquid, a certificate of deposit or a savings account?

• A. A certificate of deposit
• B. A savings account
• C. Both are equally liquid
• D. Neither is liquid

Answer: (B)

A savings account is considered more liquid than a certificate of deposit (CD) because it allows for easier and quicker access to funds. With a savings account, you can typically withdraw or transfer your money without penalty at any time, providing you with immediate access to your funds. This flexibility is a key feature of savings accounts, making them a popular choice for people who may need to access their money on short notice. In contrast, a CD often requires you to lock in your funds for a specified term, which can range from a few months to several years. While CDs typically offer higher interest rates than savings accounts, they impose penalties for early withdrawal, making it less convenient to access your money before the term ends. Therefore, when considering liquidity, a savings account clearly provides a more accessible option for managing your immediate financial needs.

A savings account is considered more liquid than a certificate of deposit (CD) because it allows for easier and quicker access to funds. With a savings account, you can typically withdraw or transfer your money without penalty at any time, providing you with immediate access to your funds. This flexibility is a key feature of savings accounts, making them a popular choice for people who may need to access their money on short notice.

In contrast, a CD often requires you to lock in your funds for a specified term, which can range from a few months to several years. While CDs typically offer higher interest rates than savings accounts, they impose penalties for early withdrawal, making it less convenient to access your money before the term ends. Therefore, when considering liquidity, a savings account clearly provides a more accessible option for managing your immediate financial needs.