Rank options by liquidity and work out what it costs to take money out early.
Most people can tell you roughly what they own. Fewer can tell you how much of it they could spend this week. Liquidity is the gap between those two numbers. Lesson 5.1, "Every place you put money trades risk, return and liquidity", defined it as how fast a holding can be turned into cash without losing value. The definition has two parts, and both matter: how fast the money comes back, and whether it keeps its value on the way.
The gap shows up when a cost arrives at a bad time. Say your phone screen cracks on a Saturday and the repair is quoted at S$400 (an example figure). You hold S$50,000 in total, mostly in CPF, a fixed deposit and a few shares. Only S$280 sits in an account you can move money out of today. On paper your net worth looks fine, but very little of it can be spent, so the repair goes on a credit card.
A savings account does well on both parts of the definition. You can usually move money out the same day, or by the next working day at the latest, and you get every dollar.
A fixed deposit is slower. The bank promises the money back on the maturity date. If you break the deposit early, you may get reduced interest or none, and in some cases you may also have to pay a fee. That fee could leave you with less than the amount you first deposited, so getting your full principal back is not guaranteed. The early-withdrawal terms are on the product page or in the letter you received when you placed the deposit. Read them before you need the money.
Some assets can be sold quickly, but only at a lower price. That loss is called a liquidity cost. The asset's underlying value has not changed. The loss comes from the hurry to sell.
Property shows this clearly. Take a private flat worth S$1.2 million. An owner who can wait months may get close to that price. An owner who needs cash within weeks may have to cut the price to find a buyer fast, and a 5% cut on that flat costs S$60,000.
Thinly traded shares, meaning shares in a company few people trade, show the same effect on a smaller scale. You can sell today, but the best offer on screen may be well below the last price you saw.
CPF is the clearest case of an asset with low liquidity that still has real value. Your CPF savings earn interest and count as part of your wealth. Most CPF money, though, can only be used for specific purposes: housing, healthcare, and approved education or investment. Beyond that, you can withdraw it only from certain ages. The rules set how much you can take out and how much is paid out monthly later in life. These 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 long-horizon money 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 has a real cushion of S$2,000, not S$82,000.
The core rule is to keep money you might need soon in liquid places, and accept less liquidity only for money with a long horizon. This is the calendar thinking from lesson 5.2, "Risk is about what happens when you need the money", seen from another side. In 5.2 the worry was that the price might be low on the day you need the money. Here the worry is that the money is stuck, or that getting it out early costs a penalty. Both lead to the same place. Money for next month's rent, an emergency, or a deposit due this year should sit where you can reach all of it quickly. Money you won't touch for ten years can sit somewhere slower, as long as it earns something for the wait.
Jun Hao is the example from lesson 1.4, "Map where your money sits and what protects it", and his figures were made up for that lesson. To rank his holdings, take each one and note how fast it turns into cash. Then note whether getting it out in a hurry costs anything: lost interest, a fee, a lost bonus, an exchange-rate loss, or a lower sale price. If you don't know a holding's terms, rank it below the ones you do know until you've checked. Sorted from most liquid to least liquid, his map looks like this:
Savings account, S$38,000: same day, no penalty. Bonus account, S$22,000: same day, no penalty, but he may lose that month's bonus if a withdrawal takes the balance below a bonus condition. E-wallet, S$600: instant for spending, but not all of it may be transferable to a bank. Top-ups made by credit card or foreign debit card, for example, cannot be transferred out, so he should check the e-wallet provider's terms for what he can move and how often. US dollar account, US$6,000: same day, but converting to Singapore dollars at a poor exchange rate is a separate cost. Brokerage cash, S$2,500: still marked "check terms", so it ranks below the others until he knows the terms. 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 early.
Two things stand out. About S$60,000 sits in the two same-day accounts (S$38,000 plus S$22,000). That covers any emergency he can picture, but it earns very little. His largest single balance, the fixed deposit, is also his least liquid one. That matters only if something goes wrong before March.
Do the same with your own holdings. Once they are sorted, match each pot of money to when you might need it. Near-term money, such as rent, emergency funds and deposits due this year, belongs in places that are fast and carry no penalty. Only long-horizon money goes somewhere slower, and only if it earns something for the wait. Then check where your largest balances sit compared with when you might need them.
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 liquid to least liquid. Note any penalty for taking money out early.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).