Saving - PERSONAL FINANCE - Lecture 5 notes

Module: Personal Finance


Lecture 5 – Savings


Learning Objectives
 Why it is important to have savings
 Risks associated with saving
 The benefits of compound interest for savers
 The important of making sure that savings are tax effective
 Different types of saving accounts
 Tax havens when it comes to savings


Savings
Safe storage of funds for future use


Reasons for saving (1)
TRANSACTIONS motive:
 For the exchange of goods
 Need to provide funds for housing, retirement, holidays, taxes and other
expensive items


Reasons for saving (2)
PRECAUTIONARY motive:
 Emergency funds, in case the unexpected happens
 House maintenance
 Car repair
 ‘Saving for a rainy day’


Reasons for saving (3)
SPECULATIVE motive:
 To invest
 Holding money to earn profits on it
 To start a business




Household Savings Ratio