Cash and Cash Equivalents
Cash and Cash Equivalents (CCE) is the fourth common type of investment This is the most liquid asset class, and an indication of the financial health of an individual, organization, or company, because it shows the ability to pay day-to-day obligations.
Cash
Cash is just what it sounds like – government-issued currency in bills, coins, and notes or in a bank account. This can include money orders, cashier’s checks, and certified checks. Some bank accounts, such as savings accounts, earn minimal interest. Foreign currency can also be counted as cash, but conversion costs must be taken into account.
Cash equivalents
Some cash-equivalent categories include:
Certificates of Deposit. This is a type of savings account that can’t be accessed for a certain time period, usually one to five years. In return for use of your money, the bank pays interest on the account. CDs are insured for up to $250,000.
Money Market Account. This is an interest-bearing bank account similar to a savings account but usually paying a higher interest rate.
Short-term bonds. These include government debt instruments such as Treasury bills with maturity terms of less than one year.
How is cash investing?
Cash and cash equivalents are considered a form of investing because your bank or credit union can use funds you deposit to make its own loans and underwriting. Banks vary widely on the types of loans they make and projects they finance.
Local community development banks and credit unions have a mission of serving their communities, especially underserved populations such as low-income and people of color. They make loans chiefly to support home mortgages, small business, or social services in their own communities.
Choosing a community development bank or credit union not only keeps your money safe, but ensures it is used to build your community. For more information, and to find a community development bank or credit union in your area, see Green America’s Get A Better Bank Map.
