Motives for Holding Money

Motives for holding money refer to the reasons people keep cash rather than investing or spending it immediately. These include the transaction motive, which is for everyday purchases and expenses; the precautionary motive, to cover unexpected costs or emergencies; the speculative motive, to take advantage of future investment opportunities or avoid potential losses; and the precautionary motive, which involves saving for unforeseen needs. These motives influence how much money individuals or businesses choose to keep readily available, balancing the need for liquidity with the desire to earn returns elsewhere.