WHY KEEPING CASH IN THE BANK IS COSTING YOU MONEY

Описание: Most people think liquidity simply means “having cash in the bank,” but liquidity is really about access to usable money. Cash is familiar, visible, and comfortable, so people assume it’s the most valuable form of money. In reality, cash sitting idle can be the most expensive money you own. Why? Because while it feels safe, it quietly loses value to inflation and misses the opportunity to reduce higher-cost interest elsewhere. Liquidity is not about hoarding money, it’s about positioning money where it does the most work.

To understand this, compare cash to credit. Suppose you have $10,000 sitting in the bank earning almost nothing, and at the same time you carry a $10,000 balance on a credit card at 27% interest. That credit card interest works out to about 2.25% per month, or roughly $225 in interest. Paying off the card saves that $225, which feels like a win. But now look deeper. If that same $10,000 is instead applied directly to the principal of a mortgage, it immediately advances the loan dozens of payments forward on the amortization schedule. In many real examples, this single decision can remove 40+ payments and eliminate more than $40,000 in future interest. The math reveals something most people never see: where money is applied matters more than how “bad” the interest rate feels emotionally.

This is the true meaning of liquidity. Credit can function as liquid money when used strategically, while cash can become expensive when left idle. The goal isn’t to avoid debt at all costs, nor is it to chase interest rates emotionally, the goal is to deploy money where it destroys the most interest. When principal is prepaid early, interest tied to future months is mathematically canceled. That’s leverage. That’s liquidity. And once you understand this, you stop asking, “Should I keep cash or pay off debt?” and start asking a far more powerful question: Where will this dollar save me the most interest over time?

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