DEFINITION of ‘Idle Funds’
Money that is not invested and, therefore, earning no interest or investment income. Idle funds are simply funds that are not deposited in an interest bearing or investment tracking vehicle, that is, not participating in the economic markets. These funds are often thought of as “wasted” funds, since they do not appreciate in any manner.
BREAKING DOWN ‘Idle Funds’
In instances where there is a positive inflation rate in a domestic nation, idle funds will actually decrease in value from a purchasing power perspective, as the funds fail to keep up with the rate of inflation. One option individuals have to earn income on funds, while maintaining liquidity of those funds, is to invest in money market or short-term interest accounts that will provide the depositor with a short-term rate of interest.