For years, keeping money readily available meant accepting virtually no remuneration. The 2026 scenario is different: there are short-term alternatives capable of offering a certain return, although inflation continues to reduce the purchasing power of savings and makes it necessary to also think about long-term growth.
In addition, the context can change quickly. In June 2026, the European Central Bank raised its three key interest rates by 25 basis points and brought the deposit facility rate to 2.25%. The institution also maintains a data-dependent approach, without committing to a specific path for rates.
This brings a classic question back to the forefront: how much money should be kept readily available and how much should be invested? The answer is not about choosing between liquidity and returns, but about assigning each part of one’s wealth a function and a timeframe.
What liquidity really means
Liquidity is the ease with which an asset can be converted into money quickly and without incurring a significant loss. It does not therefore necessarily mean keeping all capital idle in a current account.
Cash and certain savings or very short-term maturity instruments can be considered liquid. However, they do not all offer the same availability, return, capital guarantee or tax treatment. Before using them, it is worth understanding their conditions and the time required to recover the money.
Liquidity fulfils several functions:
- covering unforeseen events or periods of lower income;
- meeting expected short-term expenses;
- avoiding the forced sale of investments;
- and preserving the ability to take advantage of opportunities.
Its main value is flexibility. A sufficient buffer makes it possible to deal with a repair, a temporary loss of income or a significant payment without having to dispose of other assets at an unfavourable time.
How much liquidity makes sense to maintain
There is no amount that works for everyone. The appropriate proportion depends on factors such as:
- monthly expenses;
- income stability;
- outstanding debts;
- dependants;
- available insurance;
- and planned short-term goals.
A person with stable income, few commitments and saving capacity may need a different margin from someone with variable income or high family expenses.
It is also advisable to separate the emergency fund from the money reserved for known needs. If a home down payment, a renovation or a tax payment is expected, that capital should not be invested as if it could remain tied up for several years.
Liquidity does not necessarily compete with investment. When properly sized, it can help sustain it, because it reduces the risk of having to sell assets when their value has fallen.
The cost of keeping too much money available
Liquidity also has a cost. If the return obtained is lower than inflation, capital loses purchasing power.
Here it is worth distinguishing between:
- nominal return, which is the yield received;
- and real return, which discounts the effect of inflation.
An account or a conservative instrument may generate positive interest and still offer a negative real return. Taxes and possible costs must also be taken into account.
That is why, when comparing alternatives, it is not enough to look at the advertised percentage. What matters is how much remains after costs, taxation and inflation, as well as how long the money will remain committed.
Maintaining a reasonable reserve provides security. Keeping all wealth in liquidity for years, however, can make real growth more difficult.
Seeking returns means assuming different risks
The part of one’s wealth that will not be needed in the short term can be allocated to investments with greater return potential. But that objective always involves some type of risk.
In listed assets, risk is usually perceived through frequent price fluctuations. In other investments, it may appear differently:
- credit risk;
- permanent loss of capital;
- concentration;
- delays;
- or lack of liquidity.
The absence of daily price movements does not mean that an investment is safe. An illiquid asset may maintain an apparently stable valuation and yet experience problems that reduce returns or make it harder to recover capital.
That is why the decision should not consist of chasing the highest return, but of selecting investments that are consistent with the available timeframe, objectives and real ability to assume losses or delays.
The time horizon helps organise the portfolio
Timeframe is one of the most useful criteria for deciding how to allocate wealth.
In the short term, availability and capital preservation usually carry more weight. As the horizon lengthens, there is more room to assume volatility or illiquidity in search of growth.
Money allocated to an expense within one year should not be managed in the same way as savings for retirement. Similarly, a long-term investment should not be abandoned solely because of a one-off market movement if its thesis remains valid.
This separation by objectives helps avoid decisions based exclusively on economic forecasts or on trying to predict the next move in interest rates.
How real estate investment fits in
Real estate illustrates well the relationship between return, risk and liquidity. It can generate returns through rents, interest or value creation, but it usually requires accepting longer timeframes than many listed financial assets.
The direct purchase of a home requires significant capital and its sale may take months. In real estate crowdfunding, the entry amount may be lower, but the money usually remains committed until the maturity date or exit of the transaction.
For this reason, capital allocated to real estate projects should not come from the emergency fund or from amounts that may be needed soon. It is also advisable to diversify across transactions, developers, locations, strategies and timeframes.
Liquidity should have a function; investment, a timeframe
The objective is not to maximise the return on every euro or to keep all wealth readily available out of caution. It is about giving each part a specific function.
Money needed for unforeseen events and near-term goals should retain sufficient liquidity. Capital allocated to the long term can assume more risk or remain committed for longer in search of growth.
When that separation is clear, liquidity and returns stop competing and start complementing each other.
