This archive report was first published on 1 November 2019.
What is Idle Cash? ¶
Idle cash refers to money that has not been invested in anything and is therefore not earning any interest. It can be viewed as 'wasted' cash as it is not participating in the economic markets and thus does not appreciate in value in any way.
According to financial experts, idle cash loses the most value during inflation, as it is not in a position to grow at the same rate as the rising costs.
Published on November 1, 2019, the article highlights the importance of making idle money productive by putting it in instruments that will cause it to appreciate or earn interest.
5 Ways to Make Idle Cash Work for You ¶
- 1. Purchase Productive Assets Acquiring productive assets such as machinery or equipment can increase output and generate more income. For example, a company can use excess cash to digitize its operations, making it more efficient in the long run.
- 2. Banking Depositing money in a bank account is a better alternative than letting it lie idle. You can choose between a savings and checking account, with savings accounts earning interest that is comparatively higher.
- 3. Invest Investing in stocks, bonds, real estate, unit trusts, and commodities can be a better use of cash that you currently have no need for. Stocks offer higher income but possess a higher risk, while bonds are less liquid but far much safer.
- 4. Using it for Cost-Saving Idle cash can be used to settle other requirements that are not in your main budget or the primary budget of a company. Such expenses would include the use of the money to pay off debts or create a reserve/sinking fund.
- 5. Boosting of Goodwill and Stock Price Businesses might choose to use idle cash to redeem outstanding shares, pay dividends, or even buy back of shares. This would play a significant role in increasing share prices and serve as motivation for employees.
