Usually there are three defined motives of holding money:
- this is the most obviousreason for holding money. We need money to be able tospend it, and so hold balances of money appropriate for that.Like the amount of money that you have in your pocket,wallet or purse.
- we also hold money in casewe need to spend it. Unexpected bills or contingencies maymean that we need to hold a little extra money in case. Likethe money we hold in banking accounts.
- People have to decide howthey are going to hold their money. There are of course anumber of different ways, which can briefly split it intointerest bearing assets or non-interest bearing assets. Theinterest rate and the ease of access may be two importantfactors in determining this decision. The speculative demandfor money is the amount held for the potential purchase of assets.