Final answer:
Savings accounts with substantial withdrawal penalties, such as CDs, are better classified as time deposits or investment vehicles, not cash, due to their lower liquidity.
Step-by-step explanation:
Savings accounts with substantial withdrawal penalties should be classified as time deposits or investment vehicles rather than cash. Such accounts include certificates of deposit (CDs), where funds are locked in for a period, earning a higher interest rate. The substantial penalty for early withdrawal of these funds makes them less liquid compared to regular savings accounts or checking accounts.
Considering the liquidity and ease of access, a savings account is not as readily available for transactions as cash. While you can access your money at a bank or ATM, it is not as convenient as cash on hand, particularly when penalties are involved. In financial terms, such savings are not included in the most liquid category of assets, known as M1, but are sometimes included in a broader category known as M2, which comprises 'near money'.