There is wide variation in the need for and the ability to accumulate liquid assets. The model used for investigating liquid asset holdings attempts to isolate the precautionary motive from other motives for holding liquid reserves. The propensities for holding liquid assets for precautionary purposes are analyzed by classifying consumers according to their long-run income position. Within each class regression equations are used to test hypotheses concerning the relationship between liquid balances and age, size of consumer unit, level of current income, and home ownership.