You will be able to rank options by liquidity and spot the cost of getting money out early.
Your phone screen cracks on a Saturday, and the repair quote is S$400. You have S$50,000 to your name. Most of it is in CPF, a fixed deposit and a few shares, and the account you can move money out of today holds S$280. On paper you are fine. In practice you are putting the repair on a credit card.
That gap, between what you own and what you can spend this week, is liquidity. This lesson shows you how to rank the places your money sits by how fast it comes back, and what it costs you to hurry it.
Lesson 5.1, Every place you put money trades risk, return and liquidity, defined liquidity as how fast you can turn a holding into cash without losing value. Both halves of that matter. Speed is one. Keeping the value while you move fast is the other.
A savings account scores well on both. You can usually move the money out the same day, or by the next working day at the latest, and you get every dollar of it.
A fixed deposit is slower. The money is promised back on the maturity date. If you break it early, banks usually pay you reduced interest or none at all, and some charge a fee as well. The terms are on the deposit's product page or the letter you got when you placed it, so read them before you need them. You still get your principal back, but the reward for locking it away is gone.
Then there are things you can sell quickly, but only by accepting a lower price. That loss is a liquidity cost. Take a private flat worth S$1.2 million, a figure made up for the example. If the owner can wait months for the right buyer, they might get close to that. If they need cash within weeks, they may have to cut the price to attract someone fast, and a 5% cut would be S$60,000. The flat was always worth roughly the same, but selling in a hurry is what cost them. The same thing happens on a smaller scale with shares in a company that few people trade: you can sell today, but the best offer on the screen may be well below the last price you saw.
CPF is the clearest case of low liquidity that is not low value. Your CPF savings earn interest and count as part of your wealth. Most of it, though, can only be used for specific purposes, such as housing, healthcare and approved education or investment, or withdrawn from certain ages under rules that set how much you can take out and how much is paid out monthly later in life. The rules and ages change from time to time, so check the current ones on the CPF Board website rather than relying on what someone told you.
For planning, treat CPF as money with a long horizon that you cannot reach for a broken phone or a job loss. Someone with S$80,000 in CPF and S$2,000 in the bank does not have a cushion of S$82,000. They have S$2,000.
The rule that follows is straightforward. Keep money you might need soon in liquid places, and accept less liquidity only for money with a long horizon.
That is the same calendar thinking as lesson 5.2, Risk is about what happens when you need the money, from a different angle. In 5.2 the worry was that the price might be low on the day. Here the worry is that the money might be stuck, or cost you a penalty to free. Both point the same way. Money for next month's rent, an emergency, or a deposit due this year belongs where you can reach it in full, quickly. Money you will not touch for ten years can sit somewhere slower if it earns you something for the wait.
Here is how that looks on Jun Hao's money map from lesson 1.4, Map where your money sits and what protects it. His figures were made up for that example.
Savings account, S$38,000: same day, no penalty. Bonus account, S$22,000: same day, no penalty, though moving money out may cost him the bonus for that month if it drops below a condition. E-wallet, S$600: instant for spending, and withdrawing it to a bank may take a day. US dollar account, US$6,000: same day, but turning it into Singapore dollars at a poor exchange rate is its own cost. Brokerage cash, S$2,500: still marked "check terms", so it ranks below the others until he knows. Robo-adviser cash account, S$9,000: a few working days, because the fund has to be sold first. Fixed deposit, S$70,000: locked until March, and he would lose the interest if he broke it.
Two things stand out. About S$60,000 sits in the two same-day accounts, which covers any emergency he can picture but earns very little. And his largest single balance is the least liquid one, which matters only if something goes wrong before March.
Your own map from lesson 1.4 already lists every account you hold, with a withdrawal speed on each line. The order you get when you sort it by speed is rarely the order you would have guessed.
Rank every account and holding on your money map from most to least liquid and note any penalty for early withdrawal.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).