Cash and cash-like assets

Cash and cash-like assets

Cash and near-cash: why liquidity matters, who your counterparty is, and how it fits next to harder assets.

Published Apr 7, 2026 · Updated Apr 22, 2026

We mention a lot of government sources here because we wanted to be relatively objective informationally. The reality is that governments and financial institutions are the biggest scam artists in the world. You have to do your own research so you don't lock yourself into their increasing hostile system. Know the system... then make up your own mind.

We don't advocate for currency as an investment (or in general... for anything), but we understand it's role in liquidity, investments, and daily activites and there's nothing wrong with holding some as a practical part of your portfolio or as the primary means of payment for your daily activities.

Cash and cash-like assets

Cash and Currency: A Practical Guide to Currency and Cash-Like Assets

Cash refers to the physical currency such as bills and coins that people carry and use for everyday purchases. Currency means the same thing in most contexts, though governments and central banks issue it as the official form of money in a country by decree.

Cash-like assets include items that work almost exactly like cash. They convert quickly into actual money with almost no chance of losing the corresponding dollar value. Examples include short-term government bonds or certain bank accounts. These assets sit on company balance sheets or in personal finances because they stay liquid, which means you can access the currency fast when you need it.

Currency is not money. A money can be a currency, but a currency isn't money. They're two entirely different concepts that people often confuse. A Beginners Guide: Is it Money or is it Currency? explains the distinction in depth.

Where Cash Came From

People traded goods directly for thousands of years before cash existed. This system, called barter, required both sides to want exactly what the other offered at the same time1. Around 600 BC, the kingdom of Lydia in what is now Turkey minted the first standardized coins from a mix of gold and silver2. These coins carried official stamps and made trade simpler across distances.

China introduced paper money during the Tang Dynasty around 700 AD, starting with promissory notes from merchants and later government-backed bills made from mulberry bark3. The Song Dynasty introduced the first state-issued paper currency, known as jiaozi. Although initially conceptualized as convertible to gold, silver, or silk, conversion was never permitted in practice. The notes were designed to be redeemed after three years of service and replaced with new notes for a 3% service charge. However, as the government printed escalating volumes of paper money without retiring older notes, severe inflation became evident4.

Early civilizations used many things as money before coins: cowrie shells in China, cacao beans in Mesoamerica, salt in Rome (the word "salary" comes from "salarium," or salt money), and cattle across much of the ancient world5.

In the American colonies, paper notes appeared in 1690 to fund military needs, and the Continental Congress issued currency in 1775 during the Revolutionary War. By the late 1700s, the United States established the first mint under the Coinage Act of 1792 to produce gold, silver, and copper coins6.

The modern era of global fiat currency was permanently established during the 20th century. Following World War II, the global financial system operated under the Bretton Woods agreement, which pegged the U.S. dollar to gold and other currencies to the dollar. This system collapsed in 1971 when United States President Richard Nixon unilaterally suspended the convertibility of the US dollar into gold7. Today, the global monetary system is based purely on fiat money; a fiat currency is backed by the wishes and promises of the governments issuing it, and its singular value lies in the collective trust that all economic participants will accept the currency as a means of finalizing exchanges8. Since 1913, and even speeding up since 1971, dollar inflation has been rampant and the value of the dollar has been steadily declining.

The historical irony, if you didn't pick up on it immediately, is that every single government-issued currency failed in practice but people, not knowing history and not having financial literacy, continue to support governments controlling currency.

Why Currency Exists

Before currency existed, people traded by bartering. This meant swapping one thing for another directly. But barter only works when both people want what the other has at the exact same time. If you have chickens and need shoes, you must find a shoemaker who happens to want chickens right now. Currency fixes this by acting as a go-between. You sell your chickens for currency, then use that currency to buy shoes from anyone who accepts it. You no longer need to find someone with matching wants9.

Currency does two main jobs that people developed long before governments existed:

Medium of exchange: It acts as a go-between in trade10. If you raise chickens and need shoes, you do not need to find a shoemaker who wants chickens right now. You sell the chickens to anyone for currency, then use that currency to buy shoes from any seller. Everyone accepts currency, so trade becomes easier.

Unit of account: It gives everyone a common way to measure and compare value11. You can say a car costs $20,000 and a sandwich costs $10. Without this shared numbering system, you would need to figure out exchange rates between every possible pair of goods. How many chickens equal one shoe? How many shoes equal one car? Currency creates a simple way to compare the value of anything.

When currency values stay relatively stable, people can plan and make agreements. When inflation or deflation hits, the numbers become less reliable, making it harder to set prices or make long term plans12.

The Cash Ecosystem

Cash and currency operate inside a larger network that includes central banks, commercial banks, and payment systems. The contemporary global economy operates on a foundation of non-cash electronic money managed through a two-tier banking system. The first tier is occupied by the central bank, which maintains the monopoly on the issuance of base currency and dictates overarching monetary policy regarding interest rates and currency supply. The second tier consists of commercial banks, which play a pivotal role in the monetary system by taking retail and corporate deposits and creating broad money through the mechanism of fractional reserve lending13 (ie. you don't own the currency in your bank account, you own a fraction of it- although they changed the rules so that isn't true anymore- you don't own any of the currency in your bank account).

Physical currency (bills and coins) makes up only a fraction of the money supply. In the United States, physical cash in circulation totals roughly $2.3 trillion, but the broader currency supply includes checking deposits, savings accounts, and other liquid instruments14.

Centralized payment systems handle the flow of currency, such as card networks for credit and debit, automated clearing houses for electronic transfers, or real-time systems that settle transactions in seconds. These pieces connect so that currency moves smoothly between people, businesses, and governments without everyone carrying physical bills.

Cash and Currency as Investments

Cash itself earns little or no interest in most cases, but it offers immediate access and almost zero risk of extreme short term value changes. Companies and individuals keep some cash on hand or in demand deposit accounts because it stays available for daily needs or sudden costs.

BUT... holding cash as an investment decision with specific risk and return characteristics means knowing what you're getting into. When you hold government dollars, you are exposed to terrible inflation: the purchasing power of those dollars decreases as prices rise. From 2020 to 2024, inflation peaked at 9.1% annually, meaning cash held during that period lost significant purchasing power15- or at least that what they claim. Many people have noted that their purchasing power is less than half of what it was in 2020- meaning the dollar lost as much as half of it's value in just a few years.

Cash-like assets (called cash equivalents) earn a little interest while staying safe and easy to access. To count as a cash equivalent, two things must be true: you can turn it into cash fast, and it matures within 90 days16. Because the timeline is so short, the value stays steady even when interest rates change.

Foreign currency trading (forex) represents a separate investment category. The foreign exchange market is the largest financial market globally, with daily trading volume exceeding $7.5 trillion. Retail investors can trade currency pairs like EUR/USD, which typically shows volatility around 0.43% daily. The EUR/USD rate as of April 2026 sits around 1.172, up 3.11% over the past 12 months17. Trading currencies often involves leverage, which amplifies both gains and losses. Essentially, "professional" traders found a way to turn trading currencies into institutional gambling.

What Is Happening Now: 2025 Developments

Interest Rates and Federal Reserve Policy

As of December 2025, the Federal Reserve has cut its target interest rate to a range of 3.5% to 3.75%, down from peaks above 5% in 2023. The Fed implemented three 0.25% cuts during 2025 following a 1% cut in late 202418.

FedNow Expansion

The Federal Reserve launched a payment system called FedNow in 2023. It lets banks transfer money instantly, 24 hours a day. In November 2025, they raised the transfer limit from $1 million to $10 million. Over 1,200 banks now use it19.

It's the tip toe into the terrifying world of central bank digital currencies (CBDC).

The Shift Away from Physical Cash

People are using cash less than before. By 2024, cash usage dropped to about 80% of what it was in 2019. It keeps falling by roughly 4% each year. Experts think cash will make up only 11% of all payments by 203020.

But cash is not disappearing. In the United States, people still use cash regularly. In 2024, Americans made about seven cash payments per month, the same as in 2020. Cash remains the third most common way to pay, after credit cards (35%) and debit cards (30%)21.

Digital wallets are taking over instead. These are apps on phones like Apple Pay, Venmo, or PayPal. In 2023, digital wallets handled half of all online shopping and nearly a third of in-store purchases. By 2024, digital wallets processed $16 trillion in payments worldwide. That number could hit $28 trillion by 203022.

Global Digital Currency Projects

A CBDC is digital money issued directly by a central bank, like the Federal Reserve. Unlike the money in your bank account (which is a claim on your bank), a CBDC would be a direct claim on the government.

Countries are taking different approaches:

Retail CBDCs: These would be used by regular people for everyday purchases. Over 130 countries are exploring this, including Brazil, Russia, Kazakhstan, and the European Union23. Brazil plans to launch its Drex system in 2026. Russia expects its largest banks to start handling digital rubles by September 2026. The European Central Bank aims to have a digital euro ready by 202923.

Wholesale CBDCs: These would only be used between banks and big financial institutions, not by regular people. Many countries are shifting toward this approach instead25.

The United States has not created a retail CBDC. In 2024, the U.S. House passed the Anti-CBDC Surveillance State Act, which would ban the Federal Reserve from creating CBDCs for individuals24.

The concerns go beyond privacy. With CBDCs, every transaction creates a digital record, but more importantly, the currency can be programmed. Central banks could freeze your account if they disagree with your politics, lock you out of the system for traveling, or stop you from buying certain foods, guns, or anything else they want to restrict. Unlike cash, which works for anyone with no permission needed, CBDCs give governments the power to cut off your access to currency entirely. Some central bankers have openly stated this would give them "absolute control" over how currency moves24.

##Central Bank Digital Currency Concerns

Unlike the currency in your bank account, which is a claim on your bank, a CBDC would be a direct claim on the government. Over 130 countries are exploring CBDCs23. The United States has not issued a retail CBDC. In 2024, the U.S. House passed the Anti-CBDC Surveillance State Act, which would ban the Federal Reserve from creating CBDCs for individuals24.

Research from the Bank for International Settlements, the International Monetary Fund, and academic journals documents serious risks:

Surveillance and Control: Unlike cash, which is private between two people, CBDCs create a permanent record of every transaction. Central banks could see where you spend, what you buy, and when26. But the bigger threat is control. CBDCs are programmable currency. Central banks could freeze your account if they disagree with your politics, lock you out for traveling, or block you from buying certain foods, guns, or anything else they want to restrict. You could wake up one day unable to buy groceries because your money got turned off. Some central bankers have openly stated CBDCs would give them "absolute control" over how currency moves27.

Single Point of Failure: A CBDC system is one massive database. If hackers breach it, the entire national payment system could go down or make everything you've ever bought or sold public knowledge- like bitcoin and other surveillance-by-default currencies. The European Data Protection Supervisor warns that security gaps could destroy public trust in currency itself28.

Cross-Border Surveillance: When CBDCs cross borders, foreign governments could monitor transactions and share that data. IMF research confirms this raises surveillance risks between countries29. Foreign CBDCs might also destabilize domestic banks by pulling deposits toward foreign digital currencies30.

Expiring Currency: Central banks could attach rules to your currency. Funds could expire if not spent within a certain time, or only work at approved stores or could be used a tool of punishment for wrongthink or dissent. This fundamentally changes currency from something you own into something which requires permission to use27- effectively violating your right to own property and use it as you see fit.

High Yield Interest Savings Accounts

High-yield savings accounts pay interest rates several times higher than traditional savings accounts at big banks. As of April 2026, top high-yield savings accounts offer rates up to 4.21%, compared to the national average savings rate of roughly 0.59%. Online banks or credit unions often offer them because they operate with lower overhead31.

The annual percentage yield, or APY, compounds daily or monthly, so interest earns interest over time. These accounts usually carry the same federal insurance protection up to $250,000 per depositor as regular savings. Funds stay accessible, though some limit the number of withdrawals per month. Rates move with Federal Reserve policy; when the Fed raised rates aggressively in 2022-2023, HYSA rates rose alongside them. As the Fed cut rates in 2024-2025, HYSA yields declined from peaks above 5%32.

While the nominal principal in an HYSA is protected by federal insurance, the real spending power of the deposited funds faces constant erosion if the offered interest rate fails to outpace the prevailing rate of macroeconomic inflation33.

Why People Hold Cash

People and businesses hold cash for three main practical reasons described in economic theory:

Transaction Motive: This covers routine payments such as bills, wages, or daily purchases that require immediate settlement34.

Precautionary Motive: This sets aside money for unexpected events like medical costs, car repairs, or job loss. Financial planners typically recommend 3 to 6 months of expenses in liquid cash35.

Speculative Motive: This keeps cash ready to seize sudden opportunities, such as purchasing investments during market declines. Investors call this "dry powder": cash kept available to deploy when markets drop or specific opportunities arise36.

Banks sometimes require minimum balances, called compensating balances, to cover services they provide.

Despite inflation risk, cash serves functional purposes. Research indicates that some investors prefer cash holdings for psychological security, even when mathematical models suggest higher allocations to risk assets37.

Other Cash-Like Assets

Cash equivalents are short-term, highly liquid investments that can be converted to known cash amounts with minimal price risk. Common types include:

Treasury Bills (T-Bills): Short-term U.S. government debt with maturities of 4, 8, 13, 26, or 52 weeks. As of early 2025, 3-month T-bills yielded roughly 4.2%. Backed by the full faith and credit of the U.S. government38.

Certificates of Deposit (CDs): Time deposits with fixed terms and interest rates. Early withdrawal typically incurs penalties. When purchased with terms of three months or less, they qualify as cash equivalents39.

Money Market Funds: Mutual funds that invest in short-term debt securities. They aim to maintain a stable $1.00 net asset value. Government money market funds invest primarily in Treasuries and are considered lower risk than prime money market funds, which hold corporate debt40.

Commercial Paper: Unsecured, short-term debt issued by corporations. Only available to institutional investors directly, though accessible through money market funds41.

Bankers' Acceptances: Guaranteed drafts for trade financing that work like short-term obligations42.

Short-Term Government Bonds: Sovereign or municipal debt utilized to finance governmental initiatives. High liquidity and active secondary market trading make them equivalents, though investors must assess political risks and inflation metrics43.

If You Are Starting Out: Practical Steps

  1. Build an Emergency Fund First: Before investing, establish liquid savings covering 3-6 months of essential expenses in a high-yield savings account or money market account.

  2. Understand Your Bank's Insurance: Verify your bank is FDIC-insured (or NCUA-insured for credit unions). Keep individual account balances below $250,000 to ensure full coverage.

  3. Shop for HYSA Rates: Compare rates at online banks, which typically outperform traditional banks. Use Bankrate, NerdWallet, or similar tools to track current offerings.

  4. Treasury Direct: For U.S. investors, TreasuryDirect.gov allows direct purchase of T-bills without intermediary fees.

  5. Automate Savings: Set up automatic transfers from checking to savings. Behavioral research consistently shows automation increases savings rates.

  6. Track Real Returns: Subtract inflation from your interest rate to understand true purchasing power. If your HYSA pays 4% and inflation runs 3%, your real return is 1%, not 4%. (Know that this is a farce though since real inflation is far higher than the official inflation rate)

Financial Literacy and Educational Resources

Skip the government-approved curricula. Independent sources offer clearer insights without pushing you toward systems that track and control your money.

Learning More

Investopedia: Basic definitions and concepts without political slant BabyPips.com: Free forex education if you want to understand currency trading Khan Academy: Explains economics without promoting specific policies

Practical Skills:

Learn compound interest on your own by running the math: $1,000 at 4% annual interest becomes $1,040 in one year, then $1,081.60 in year two because you earn interest on the interest. No need for government-approved courses to understand this.

The best teacher is experience. Open a basic savings account at a credit union (not a big bank), track how interest compounds, and observe how your purchasing power changes when inflation hits. Watch what happens to prices at the grocery store compared to what the official inflation numbers claim.

Read about monetary history from multiple angles, not just the official stories. Look into how the Federal Reserve actually operates, who owns it, and how money gets created in the current system. Question why banks get bailouts while regular people face foreclosure.

Real financial literacy means understanding the system well enough to protect yourself from it, not learning how to participate obediently within it.

Government and Central Bank Sources:

  • Federal Reserve: federalreserve.gov (economic data, policy statements)
  • TreasuryDirect: treasurydirect.gov (T-bill purchases, savings bonds)
  • Bureau of Labor Statistics: bls.gov (inflation data)

Independent Educational Sites:

  • Investopedia: investopedia.com (definitions, tutorials)
  • BabyPips: babypips.com (forex education)
  • Khan Academy: khanacademy.org (free economics courses)

Rate Comparison Tools:

  • Bankrate: bankrate.com
  • NerdWallet: nerdwallet.com

Research Organizations:

  • Bank for International Settlements: bis.org (global payment systems)
  • International Monetary Fund: imf.org (global financial stability reports)
References
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  3. Federal Reserve Bank of Philadelphia. "Money in Colonial Times." https://www.philadelphiafed.org/education/money-in-colonial-times ↩
  4. Wikipedia. "Fiat Money." https://en.wikipedia.org/wiki/Fiat_money ↩
  5. Crypto.com. "The History of Money, Part 1 — From Barter to Currency." https://crypto.com/en/university/history-of-money-barter-to-bitcoin ↩
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  14. Author's calculation based on Federal Reserve data ↩
  15. BLS CPI data; Federal Reserve Economic Data ↩
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  17. Trading Economics. "Euro US Dollar Exchange Rate - EUR/USD." April 2026 data. https://tradingeconomics.com/euro-area/currency ↩
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  19. Federal Reserve Financial Services. "Recent FedNow Service Announcements." October 2025. https://www.frbservices.org/news/fed360/issues/110425/fednow-service-five-fall-announcements ↩
  20. Smithers. "Digital is Reshaping Cash Cycles and Physical Currency Demand Globally." November 2025. https://www.smithers.com/resources/2025/november/digital-is-reshaping-cash-cycles ↩
  21. Federal Reserve Financial Services. "2025 Diary of Consumer Payment Choice Reveals Trends in Consumer Cash Usage." https://www.frbservices.org/news/fed360/issues/060325/cash-2025-findings-diary-consumer-payment-choice ↩
  22. PCMI. "Top Global Payment Methods and Trends 2025." https://paymentscmi.com/insights/top-global-payment-methods/ ↩
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  26. Taylor and Francis. "Privacy Implications of Central Bank Digital Currencies (CBDCs): A Systematic Review of Literature" (2024). https://www.tandfonline.com/doi/full/10.1080/07366981.2024.2376794 ↩
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  30. IMF. "Cross-Border Central Bank Digital Currencies, Bank Runs and Capital Flows Volatility" (2022). https://www.imf.org/en/Publications/WP/Issues/2022/05/06/Cross-Border-Central-Bank-Digital-Currencies-Bank-Runs-and-Capital-Flows-Volatility-517625 ↩
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  35. Financial Planning Association research ↩
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FAQ

How much physical cash should I keep outside the banking system?

Most people who worry about bank freezes, power outages, or digital surveillance keep one to two months of expenses in physical cash stored securely at home. This is not money for investing. It is insurance against the banking system going down, whether from cyber attacks, bank holidays, or frozen accounts. Store it somewhere fireproof, waterproof, and hidden from casual visitors.

What is the difference between fiat currency and "sound money"?

Fiat currency is what we use today: paper bills backed by nothing but government promises and the threat of violence if you refuse to pay taxes with it. Central banks can create unlimited amounts, which slowly destroys your purchasing power through inflation. "Sound money" refers to currencies that cannot be printed at will, historically meaning gold and silver coins. The supply is limited by nature, not by bureaucrats. When currency is harder to create, it tends to hold its purchasing power over long periods.

Can the government freeze or seize my bank account without warning?

Yes. Through "civil asset forfeiture" or anyone other made up reason... law enforcement can seize accounts and cash without charging you with a crime. Banks can also lock you out of your account if they don't like what you're spending things on. It's been happening more and more and more frequently. Banks file Suspicious Activity Reports on your transactions, and government agencies can freeze accounts based on these reports. Under the Bank Secrecy Act, banks must report cash deposits over $10,000 and can report any activity they deem unusual. Once frozen, you must prove your money is innocent to get it back. This is why physical cash outside the system provides a backup.

What are stablecoins and are they a viable alternative to CBDCs?

Stablecoins are digital tokens supposedly backed one-to-one by dollars, gold, or other assets. They run on blockchains and let you send value globally without banks. Unlike CBDCs, most stablecoins are issued by private companies, not governments. This means less surveillance but more counterparty risk: the company might lie about reserves or get hacked. Tether, the largest stablecoin, has faced repeated questions about whether it actually holds the dollars it claims. Stablecoins offer freedom from banking hours and borders, but you trade government risk for corporate risk.

Is a high yield savings account safe?

Meh... FDIC insurance covers deposits up to a statutory limit per depositor per institution. But that's just a government promise to pay you back if your bank fails. You're still exposed to counterparty risk.

Is this financial advice?

No. This content is general education only.