Liquidity refers to how quickly an asset can be converted into cash without significant loss of value. Currency is the most liquid asset as it is already in cash form. Demand deposits are the next most liquid as they can be withdrawn on demand. Savings deposits are less liquid than demand deposits because while they can be withdrawn easily, there might be minor restrictions or the primary purpose is saving. Time deposits (like fixed deposits) are the least liquid as they have a maturity period and withdrawing them before maturity often incurs a penalty.