The term “hot money” has been around for a long time now and has different meaning and different uses, depending on the market and industry. The term hot money is also used in legal and illegal instances

In the banking industry, hot money applies in different aspects. Hot money can be when money is transferred internally, from American Dollars to moneys in another nation, because of questionable or illegal activities. This transfer can also take place legally. Investors will sometimes transfer their moneys from American to a different countries dollar to see a higher yield when it comes to interest rates. This money is usually there short term, only until a large enough return is seen in a short amount of time, and then it is transferred back making an income.

Hot money is also money that is very desirable and needed. When a person has money or assets that are highly liquefiable, that money is hot. This money is usually hot because a person is in dire need of the money or some kind of financial stress. This money can usually be taken or drawn upon on a moments notice.

Criminally, hot money can be anything such as money that was stolen, robbed from bank or money that was earned as result of the sale of illegal items such as drugs or items stolen from a house during a robbery and moneys that were illegally printed. Any money that can be linked back to a crime is considered hot money.

Hot money can also be applied to something that you use frequently. Money spent on supplies that are in constant use and replacement for a business is also hot. You unfortunately have to get rid of the money fast to buy something that you are in need of.

Have you ever had the urge to spend the extra money out of your paycheck? When you use that money it is now hot money. Money that you don’t need for something important and willing to waste to get something you want is hot money.

Hot money can be applied to many different aspects of life, whether it is illegal or legal. Any money that is quickly spent or transferred it hot. Think of it more like the hot potato game. The potato is hot so you quickly pass it along.