Family Economics and Consumer Education

Family Economics And Consumer Education 3 (2+1)

Lesson 10 :Avenues for Savings and Investments

Details of the various avenues and their advantages for savings and investments.

The following avenues or facilities are available for saving by the individuals and families in our country.

1. Post Office
2. Banks
3. Insurance companies
4. Provident fund
5. Mutual fund
6. Chit fund

1. POST OFFICE SAVINGS:

Post office saving is one of the institutions where people can deposit their savings and earn a good return for their savings. Even rural households have the access to post office. Hence it is an ideal place to start the savings practices with post offices. Post offices have different schemes offered to people to deposit their savings viz,

1. Post Office saving Account:

People can invest their savings in this account in individual or joint names. They have to maintain a minimum and maximum balance of savings as notified by the postal authorities. The interest rate on such deposits is notified by the postal department from time to time. Cheque facility is also provided in this type of account.

2. Post Office Time deposits: The depositors have to invest their money in this type of saving scheme in post offices. Minimum amount of deposit is notified from time to time. There is no maximum limit. There is an exemption from Income Tax on interest income.
3. 5 years post office Recurring deposit Account: Deposits are received by the post office by individual on monthly basis and interest is paid at stipulated rate. Investment may be for a minimum amount. No limit is fixed for maximum amount.
4. Post office Monthly Income Scheme: Here an amount varying from Rs 5000/- to Rs 7 lakhs is kept under this scheme. Interest is paid at the stipulated rate.
5. Indira Vikas patra: The deposit in this scheme of the post office doubles in 6 years. No limit is imposed in investment amount.
6. Public Provident Fund: Individuals can invest in these funds. Interest is paid as per latest stipulations. Investment may start from Rs 100 onwards during a year. They can be made in lump sum or in monthly investments.
7. Kisan Vikas Patra: The invested money doubles in 6 years in KVP. There is no limit on investments.
8. National Saving Scheme Account (1987) NSS: Deposits in multiples of Rs 100/- have to be made. Interest is paid as per prevailing rates.
9. National saving Certificate (NSC): Interest per annum is compounded six monthly and is payable at maturity. No maximum limit is fixed.
10. Deposit Scheme for Recurring Government Employees: Investment starts from Rs 1000/- and maximum limit is not exceeding the total retirement benefits. Interest is paid as per prevailing rates.

The above savings benefits through post office savings scheme can be taken by families suiting to their requirement like regular income, lump sum need after a period of 5-6 years etc.

2. BANKS AND SAVING FACILITIES:

In India we have different types of banks viz Commercial banks-(Government as well as Private), foreign banks, cooperative banks etc. All these types of banks are under the overall control and regulations of the Reserve Bank of India.
The general accounts offered by the banks for savings are,

• Saving Accounts
• Current Account
• Recurring deposits
• Cash Certificates
• Fixed deposits
1. Saving Accounts: An individual can deposit his money in this type of account. When one wishes to with draw money. Interest is paid according to the prevailing rates. Withdrawal is restricted according to rules of the bank.
2. Current Account: This type of accounts are suitable mainly for businessmen who would like to keep their money safe at any time and withdraw any number of time. These accounts are not eligible for any interest.
3. Recurring Deposits: This type of account is ideal for family savings. It promotes regular saving habit. One has to deposit a fixed amount regularly every month without fail. The bank will repay the accumulated amount along with interest at the end of the stipulated period. This type of savings will help the family members to buy consumer durables or for paying consumer durables.
4. Cash Certificate: These certificates are issued in the denominations of Rs 10/- , Rs 50/-, Rs 100/- etc. Interest is paid according to the prevailing rates.
5. 5 Fixed Deposits:
Under this scheme of savings money is invested with a bank for particular period. The interest rates vary according to the period of deposits. The deposited amount along with interest is paid at the end of the period for which the amount is deposited. For the family preferring to save money in bank savings scheme it should decide the type of bank saving accounts suiting to the needs and convenience.
3. LIFE INSURANCE:

Life insurance is another way of saving money out of the family income. Life insurance is a contract providing for payment of a sum of money to the person insured. The insured person contributes to the common fund and the amount along with the bonus. The insured person gets the amount at the maturity of the policy.
There are numerous private and government insurance companies in India that have become synonymous with the term insurance over the years. Offering a diversified product portfolio and excellent services the many insurance companies in India have managed to make their way into almost every Indian household
Types of Insurance

1. Life Insurance - Insurance guaranteeing a specific sum of money to a designated beneficiary upon the death of the insured, or to the insured if he or she lives beyond a certain age.
2. Health Insurance - Insurance against expenses incurred due to illness of the insured.
3. Liability Insurance - This insures property such as automobiles, property and professional/business mishaps.