6 Steps to Reach Financial Freedom: Step 4


Cash and Cash Equivalents

Cash equivalents are safe, short-term, highly liquid investments that are, as the name suggests, equivalents to cash.

Cash equivalents are excellent savings vehicles for short-term goals. Here are a few examples:

  • Money market funds. Technically a mutual fund, money market funds strive to maintain a share price of $1 and usually provide higher interest than typical savings accounts.
  • Certificates of deposit (CDs). Also referred to as time accounts, CDs provide a “locked” amount of interest for a specified period of time. They are also FDIC insured.