Financial capital is the stock of unencumbered monetary assets invested in other
forms of capital or financial instruments. Financial capital, if well-managed, generates
monetary returns that can be used for further investment or consumption. For
example, financial capital can be invested in land protection through outright purchase
or purchase of easements. Public financial capital can be accumulated in a variety
of ways including building budget surpluses by collecting more in tax revenues
than is spent on services, borrowing through bonding, and charging fees for public
services over and above the real cost of services. “Rainy day funds” are an example
of public stewardship of financial capital, designed to help society weather risks and
uncertainties. In addition, through the growth of the nonprofit sector, private philanthropic
capital is often tapped for investment in other forms of capital that yield
public goods, for example, preventive health care programs to increase individual
capital. Stewardship of financial capital implies responsible investment to generate
added income as well as elimination of unnecessary cost or waste in providing public
goods and services. In creating wealth, we strive to invest financial capital in ways
that increase and improve the quality of the other six forms of wealth.
Financial capital – Money and other liquid financial assets (assets than can be
readily sold and converted to money), such as stocks, bonds, futures contracts,
and letters of credit, net of financial liabilities.