introduction to saving meaning of saving factors affecting

2. M E A N I N G OF SAVING
SAVINGS REFERS TO THAT PARTOF INCOME WHICH IS NOT SPENTON CONSUMPTION.
INFACT MOST INDIVIDUALS DO NOT SPENT THE WHOLE INCOME EARNED BY
THEM. THEREFORE THEAMOUNT WHICH IS NOT SPENTBYTHEM BECOMESSAVING
AND A SOURCE OF INVESTMENT.
SAVINGS = INCOME –CONSUMPTION
S = Y - C
IN OTHER WORDS, SAVING IS EXCESSOF INCOME OVER CONSUMPTION EXPENDITURE.
THERE IS DIRECT RELATIONSHIP BETWEEN SAVING AND INCOME.

3. FACTORS AFFECTING SAVINGS
INCOME LEVEL.
RATE OF INTEREST.
VOLUME OF NET INCOME.
TAX POLICY OF GOVERNMENT.
GENERAL PRICE LEVEL.
CHANGE IN POPULATION.
UNFORESEEN EMERGENCIES.
ALL THESE FACTORSAFFECT SAVINGS DIRECTLY OR INDIRECTLY.

4. REASONS PEOPLE SHOULD SAVE
Emergencies —Examples of emergencies can include illness, losing a job,
or immediate need to replace something .
Expenses — It’s important to know your regular (fixed) monthly expenses
as well as your ever-changing (flexible) monthly expenses.
Savings accounts can be used as a budgeting tool to manage these.
Future Purchases — Money can be used to meet future goals such as a
college education, new car, down payment on a home.
Investing — After an individual has established a savings account, money
should eventually be invested for future income.(retirement)
INFLATION – Inflation means rising price,saving helps to achieve the goals
even during inflation.

5. DEVELOPING A SAVINGPLAN
Track spending for one or three month to determine where
money is going
50-30-20 RULE OF SAVING
spend 50% of income on necessities
30% on wants like vacations
20% must be invested
Reward yourself- each time you deposit money reward yourself
with something.
Pay roll deduction – one way to save automatically is to
authorize your employer to deduct a specified amount from your
paycheck and deposit it into your saving account.

6. TYPES of saving
1. Compulsory saving- Savings by individuals made under
government rules and regulations are known as compulsory
savings.
Eg; provident fund,gratuity
2.VOLUNTARY SAVINGS - Individuals &families can save
money voluntarily by depositing in post office or banks
and taking insurance policies or by contributing to
polices or by contributing to public provident fund.

7. SAVING INSTITUTIONS

8. Commercial Banks — This type of bank serves individuals and businesses
with a wide variety of accounts, loans and other financial services like saving
and checking accounts, loans, and some types of investment services.
Savings Banks — This type of financial institution is owned by their
depositors. As owners, depositors earn dividends instead of interest. A
dividend is a share of the company’s profits.
Credit Unions — These are financial institutions that offer memberships to
people who share a common bond such as people in a particular profession,
company, church, or labor union.
Credit unions do not operate for profit. They exist solely to provide saving
and lending services to their members.
They pay slightly higher interest rates.