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Savings&insurance

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Savings&insurance

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Savings&insurance

  1. 1. M. Varlakshmi
  2. 2. In Economics, Savings = MinusINCOME Consumption Savings & Insurance 2
  3. 3. Savings is the heart of the economic growth  Aids in economic investment in an economy which is limited to the amount of money available (savings) to fund investment projects.  Production of capital goods  Raises people's living standards  Comfortable Room for Future consumption This short-run pain but long-run gain is at the root of economic growth. Savings & Insurance 3
  4. 4. Savings are done by Three Entities in the Economy: Money is to serve as a medium of saving. Instead of saving goods, which must be stored, people can save money. Savings & Insurance 4 Households GovernmentCompanies
  5. 5.  Households save to cover Future Expenses Provide emergency cushion for medical expenses Children Needs like Education, Marriage Buying goods and Property Tide sudden loss of income, unfortunate contingencies Retirement and the like…. Company save to finance future investment in the business (expansion of existing facilities and the replacement of outdated equipment).  Government Surplus spend on the building of new roads, bridges, hospitals, schools, Infrastructure etc. Saving money can help the Entity become financially secure and provide a safety net in case of an emergency. Savings & Insurance 5
  6. 6.  If Households fail to save sufficiently they will struggle financially without sufficient funds to cover future expenses and during retirement. They will eventually become dependent on others or the government.  If Companies do not or cannot save sufficiently, they will not have the capital available to finance replacement or expansionary investment. This will put a dampener on the company’s efficiency and growth potential, as well as its ability to employ more people. Savings & Insurance 6
  7. 7.  If Government does not save, it simply means it will have no money available for fixed investment in social infrastructure (schools, hospitals, low cost housing, etc) or physical infrastructure (roads, bridges, harbours, airports, etc). Insufficient investment in an economy means sub- optimal economic growth, sub-optimal job creation and inferior overall living standards relative to nations with a better savings performance. Savings & Insurance 7
  8. 8. The Three entities respective savings behaviour are closely interlinked. For example, low saving households will eventually increase the burden on government to provide social services, limiting government’s ability to rather spend money on social and physical infrastructure (ports, roads, bridges, schools, hospitals, etc). Savings & Insurance 8
  9. 9.  Government could, of course, raise taxes to generate additional revenue to cover the additional social expenditure, but this will further limit households’ ability to save and spend, and, if the additional tax burden falls on companies, it will reduce their profitability and limit their ability and willingness to invest (as overall demand prospects worsen owing to the higher tax burden). So, there is unfortunately no easy answer other than that at all levels need to develop a much stronger culture of savings. Savings & Insurance 9
  10. 10. The factors that need to be considered when determining how much a household must save will depend √ The length of time over which savings will be made (the longer the better), √ the expected investment returns before and during retirement (the higher the better) and √ the ‘targeted amount’ of capital that will be needed to retire comfortably. Savings & Insurance 10
  11. 11. Make sure you fully understand your future financial needs (including your pension provisions) Start saving early – time is your best friend Beware of ‘quick-rich’ schemes as much money has been lost on these over the years – if it sounds too good to be true, it most likely is Entrust your money to reliable financial institutions with proven track records Savings & Insurance 11
  12. 12.  ** The recent global panic around huge and growing government debt levels around the world has, in effect, highlighted the need for individuals to save more. With many governments around the world needing to focus heavily on reducing their budget shortfalls and containing their outstanding debt levels, an early casualty of fiscal tightening has been social security cutbacks (cutting pension benefits, raising retirement age, etc). People worldwide will have to accept that governments will not be able to lend much support during their retirement years. People will have to care for themselves and this will likely require much higher savings during their working years. Savings & Insurance 12
  13. 13.  Insurance is an arrangement / Contract represented by a policy by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium. The individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured. Savings & Insurance 13
  14. 14. Savings & Insurance 14 The purpose of any insurance is to provide economic protection against the losses that may be incurred due to chance events such as : Death Illness Damage to Property In current scenario, insurance has become widespread to cover Retirement Children Education & Marriage Needs Property & Debt
  15. 15. To protect from the negative economic impact to the dependents of the earning member government encourages savings in the form of insurance under various exemptions / deductions to certain limits of the Income Tax Act. Savings oriented insurance policies have been chosen widespread across individuals. Savings & Insurance 15
  16. 16. The choices are many and super specialized which in many cases encouraged by the Government with an array of Tax benefits as Deductions under certain sections / provisions of the Income Tax Act. Savings & Insurance 16 Insurance Life Insurance, Term Insurance, Medical Insurance, Group Insurance, Accident insurance, Property Insurance, Key-Man Insurance & Debt Insurance Savings SB A/cs in Bank, FD, RD, CD PPF, EPF, KVP, Sukanya Samridhi Yojana, NSS, PO Savings & Schemes Investments Shares Securities / Debentures ELSS Mutual Funds etc. Gold, Land etc. Precious Metals & Re-Sale Valued Assets
  17. 17. Thank You !Wish You All a Healthy Life with Abundant Savings duly Insured And a Great Lifetime. THANK YOU ! Savings & Insurance 17

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