Precautionary motive relates to

The precautionary motive relates to the demand for money. It refers to the desire of individuals and firms to hold money as a precautionary measure against unexpected future expenses or emergencies. This motive for holding money is based on the need for a financial cushion to protect against unforeseen events that might require immediate access to funds. The greater the uncertainty and risk of future events, the greater the demand for precautionary money holdings.