Holding money to take care of contingencies is known as the precautionary motive.
Let me explain this further in a simple way:
Imagine you keep aside some money for unexpected events, such as medical emergencies, car repairs, or other sudden expenses that might occur. This act of saving money for unforeseen needs is called the precautionary motive.
The main purpose here is to have money on hand to tackle emergencies or any sudden need without having to struggle or sell other assets quickly.
This behavior is different from having money for regular expenses, which is known as the transactions motive, where the money is kept for day-to-day spending like groceries and bills.
It is also different from speculative motive, where money is held to take advantage of future investment opportunities.
Lastly, expansionary motive typically relates to policy measures encouraging broader economic growth and isn't directly about individual money-holding behavior for emergencies.