The term “cash management” used to mean putting your money into a checking or savings account. Since each bank had similar interest rates, there was little benefit gained from shopping around for slightly higher returns. However, times have changed. An increase in competition and a reduction in banking regulation have resulted in a much different environment today for managing cash and short-term liquid assets.

The institutional environment has also changed. Previously, only banks could offer checking accounts, and only brokerage houses could sell financial assets, such as stocks, bonds, and mutual funds. Now banks can offer financial services, including financial assets, and brokerage houses can offer checking accounts and other services. The challenge now is for you to understand the different alternatives available and to choose the alternatives that will help you achieve your financial goals the soonest.

When you have completed this section, you should be able to do the following:

1. Realize the importance of good cash management in achieving your goals
2. Understand the different cash management alternatives and how to compare them
3. Know the different types of financial institutions and understand how they can help you meet your financial goals
4. Understand the time commitment necessary for you to effectively manage your finances