Cash Equivalents

Cash equivalents are short-term, highly liquid investments that can be easily converted into cash. They include:

• Money market funds: Funds that invest in highly liquid debt instruments, such as Treasury bills and commercial paper.
• Certificates: Deposits in banks or savings institutions that offer a fixed interest rate for a set period.
• Treasury bills: Government securities that are sold to raise money and have a maturity of less than a year.
• Commercial paper: Debt securities issued by corporations that have a maturity of less than a year.
• Government agency securities: Debt securities issued by government agencies, such as the Federal Reserve and the US Treasury.

Cash equivalents are often used to store money for short-term savings goals, such as emergency savings or money that will be needed in the next few months. They are also used to generate a modest return on savings.