Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Earning Assets

What it is:

Earning assets are assets that generate income like interest or dividends.

How it works (Example):

Typically, earning assets require very little ongoing work from the owner of the assets. Interest-bearing accounts, CDs, dividend stocks, preferred stocks, bonds, and similar instruments are earning assets.

Why it Matters:

For individuals, earning assets can be useful in funding retirement; for companies, earning assets often are places to deposit excess cash. Because many types of earning assets are offered by banks, the supply of earning assets is often dictated by the amount of excess reserves banks have. This is one reason that reserve requirements affect interest rates.