Family Economics And Consumer Education 3 (2+1)

Lesson 09 : Planning for Family Financial Security-Savings and Investments

Some Important Reasona For Savingaare

1. To avoid economic insecurity
2. To use during emergencies
3. To do large purchases
4. To make use of investment opportunities
5. As a hedge against inflation.

1. Economic insecurity implies fear of loss of the economic means to provide for needs and wants.
Eg: If the head of the family is retiring shortly and they have to vacate quarters provided by the firm or the institution due to retirement, the family’s income will reduce and secondly they have to pay more rent. At this stage, the savings help a lot. The common practice in service is a compulsory deduction from the employee’s salary as savings given after retirement. But this also has drawback, ie such plans do not give scope for accumulating more money than prescribed amount. But such compulsory savings are not possible for the business or professional or daily wage earner.
2. Emergency needs can be met out through planned savings.

It is realistic to anticipate possible emergencies and to be preparing to face them. But one cannot anticipate all kinds of emergencies. So planned savings for emergency use only should be made.
Two reasons about emergency savings are

1. The money should be kept where it is readily available
2. Don’t get into the habit of using these savings for other things other than that for which they are intended.
3. If Large Purchase: is desired in future, then one has to save certain amount so that they can do that purchase at the planned time. One advantage is that one can earn certain amount of interest on the amount saved and also the interest that they have to pay of loan taken. For doing the particular purchase. In modern life household durables are essential and the family in the beginning stage has to plan for the purchase of these goods and the savings practice should help a lot to reach the goals.
4. Investing Is Nothing But Taking Money To Make Money: Savings is the foundation for most people’s investment plans. Adequate savings enable one to invest in money making opportunities which will be addition to the income. One can invest on real estate like land, house etc.
5. An Hedge Against Inflation:
Inflation means rising prices, saving is the 1st step in diminishing the effect of inflation. Savings helps to achieve the goals even during inflation,