Savings Methods

Posted in Finance, Accounting and Economics Terms, Total Reads: 545

Definition: Savings Methods

Savings refers to the act of preserving money for future use (especially after retirement) by an individual. The main motive behind saving money is to make arrangements for managing expenses when an individual is not earning money.

There are several methods in which money can be saved. Some of these methods are discussed below.

  1. Purchase Savings Bonds: Savings bonds give a regular monthly income in the form of interest. Hence an individual can earn money regularly even without doing anything. Moreover, the bonds can be cashed in on maturity. The tax is applicable only after cashing in of the bonds.
  2. Investments in Stocks: With a good understanding of stock market or with the help of a broker, an individual can invest his money in appropriate stocks. The values of these stocks are supposed to grow over time. They can be sold any time at market price to get money.
  3. Tax Refund Savings Account: This is a good method of saving. An individual puts all his tax returns in a savings account with a bank. Significant amount of money is saved within years.
  4. Employer Based Retirement Plans: Employer-based retirement plans are the best and widely used tools of saving money. Even an individual can contribute additional fund to these plans to extract higher financial benefits after retirement. 
  5. Bank Transfers: Here the act of savings is treated like a liability which an individual must fulfill. The individual automatically transfers a certain percentage of his money income to a savings account in the bank before getting actual disposable income. This transfer is equivalent to paying electricity/telephone bill. As a result, the individual is better able to manage his expenses without worrying too much about savings.

In the present era of globalization and privatization, the pension scheme prevalent in government jobs is no longer applicable everywhere. Besides, the society is increasingly becoming consumerist. Hence, in order to ensure a steady stream of living and a life of dignity in later stages of life, adopting one or more saving instruments play a vital role.


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