SAVINGS AND INVESTMENTS

• Ms. Roma GandhiDr. BMN College of Home ScienceNAAC Accredited ‘A’ Grade CGPA 3.64/4UGC Status: College for Potential of ExcellenceINDIA

MEANING OF SAVINGS• According to Fitzsimmons (1950): “It refers to the process of

keeping some amount from the current income for the purpose of taking care of future needs and wants”.

• The term savings means “ refraining from spending for consumption needs.” Savings are the difference between earnings and expenditure

• It can be defines as, “certain proportion of income kept aside for future use”.

OBJECTIVES OF SAVINGS• Reduces economic insecurity especially in old age• Help in period of inability• Useful during an emergency• Becomes a source of income• Savings are useful habit to cultivate as it is a sure means of family security• Useful for children’s marriage, education or other family expenditure• It gives feeling of security

CHARACTERISTICS OF A GOOD SAVING PLAN

• Safety of original amount invested• Return – Higher the return, the greater is the risk• Convenience –

plan should be easy to handle and understand• Liquidity – Easily converted into cash• Income tax relief offered on certain saving

SAVING

Compulsory Voluntary

ProvidentFund

GPF CPF

PPF

Bonds

Banks Post Office Insurance

UTI Schemes

TYPES OF SAVINGS

PROVIDENT FUND (P.F.)

• Compulsory saving schemes for all salaried employees• The accumulated amount with interest is returned to employee on retirement• It is calculated as a percentage of your salary (basic pay and dearness

allowance if any). Specific amount is deducted from salary every month• Income tax relief is given• Rate of interest is 8.6% per annum (rate of interest changes every financial

year)• Loan can be taken against the fund as per rules laid down by the Provident

Fund Commissioner

TYPES OF PROVIDENT FUND

Provident fund (P.F.)

Public Provident Fund (P.P.F.)

Contributory Provident Fund

(C.P.F.)

General Provident Fund

(G.P.F.)

VOLUNTARY SAVINGSBANKS• Banking is an important aid to business• Banks of different types provide finance, which is the foundation of

every business activity• A commercial bank is a business organization that deals in money; it

borrows and lends money in turn making profit• Acc. To Dewett and Varma, “Banks act as intermediaries between

those who have surplus money and those who need it”.• In short, they borrow to lend• They borrow in the form of deposits and lend in various forms of

advances

FUNCTIONS OF BANKS

TO ACCEPT/RECEIVE DEPOSITS

SAVINGS BANK

ACCOUNTCURRENT ACCOUNT

BANKERS CHEQUE/PAY

OREDERS

FIXED DEPOSIT ACCOUNT

RECURRING DEPOSIT ACCOUNT

CASH CERTIFICATES

CREDIT CARDS

SAFE DEPOSIT VAULTS/LOCKERS

ADVANCING LOANS

BY ALLOWING AN OVER DRAFT

TRANSFER OF MONEY

DISCOUNTING BILLS OF

EXCHANGE/HUNDIES

BY CREATING A DEPOSIT

POST OFFICE

• The post office savings bank is now the largest savings institution in the country with network of about 1,45,000 post office since independence

• The government has been introducing various schemes from time to time to suit the varying requirements of the society

• The postal banking system is now having more saving schemes than commercial banks

• Commonly used institution for savings• Available even in remote areas• One can save time by taking help from agents

POST OFFICE

POST OFFICE SAVINGS ACCOUNT

POST OFFICE MONTHLY

INCOME SCHEME

POST OFFICE TIME DEPOSIT

ACCOUNT

POST OFFICE RECURRING

DEPOSIT ACCOUNT

NATIONAL SAVINGS

CERTIFICATE (NSC)

KISAN VIKAS PATRA

PUBLIC PROVIDENT

FUND ACCOUNT

GOVT. OF INDIA SENIOR CITIZENS

SAVINGS SCHEME

INSURANCE

• Insurance is a social device in which a group of persons having to face a similar kind of risk contribute to a common fund, to compensate the few who actually suffer

• The document which contains the contract, is called “the Insurance Policy”• The person who is incurred is called “the Insured” and the firm, which insures is

called the “Insurer”• A ‘Premium’ is the sum of money, which the insurer gets from the insured for the

former’s guarantee to make good a specified loss suffered by the latter• ‘Risk’ means a happening or contingency against which insurance is affected

LIFE INSURANCE

• Life Insurance is a contract between the insurance company and the insured whereby the insurer in consideration of a premium, undertakes to pay a certain sum of money on the death of the insured or on expiry of a stipulated period which ever happens earlier.

ADVANTAGES OF LIFE INSURANCE

• Life insurance is a convenient mode of providing safety to the dependants in the event of premature death of the family holder

• Life insurance is a sort of provision of old age• Now a days, many types of policies can be taken out to suit the capability and

convenience of the persons who intend to get assured• It helps to provide money for the education or marriage of children. It provides finance

for replacement of an asset. Thus, life insurance policy provides financial support to policy holders in case of urgent need. Life insurance has a loan value.

ADVANTAGES OF LIFE INSURANCE CTD…

• The habit of saving can be inculcated in people. Taking a life insurance policy induces people to save compulsorily for payment of premium and for keeping the policy alive or in force.• In case of ‘with profit’ policy the insured can get bonus also• A Life insurance policy can be assigned to third person for the purpose of

raising loans• Life insurance helps capital formation that ultimately contributes to the

economic development of the country

KINDS OF LIFE INSURANCE

POLICIES

ENDOWMENT POLICY

GENERAL INSURANCE

WHOLE LIFE POLICY

MONEY BACK POLICY

FIRE INSURANCE

MARINE INSURANCE

GENERAL INSURANCE

MOTOR INSURANCE

SOCIAL INSURANCE

LIABILITY OF EMPLOYERS

FIDELITY INSURANCE

PERSONAL ACCIDENT

INSURANCE

ANTI – THEFT, ROBBERY

INSURANCE

BONDS

• Bonds are issued by a corporation or by government, the investors are lending money to them and hence they become creditors

• The organization issuing bonds acknowledges that it owes the bond holders a certain sum of money and pledges to repay on a certain date and under certain conditions

• It also pledges to pay a certain amount of interest on specified dates• The rate of interest that the borrower agrees to pay on the borrowed money is printed on the bond

and is called “stated rate”. The actual return received by the buyer is called “effective rate”.• Paying less than the stated value of the bond is called buying at a discount and paying more is

called buying at a premium.• The due date of maturity is the date on which the borrower repays the principal amount.

TYPES OF BONDS

GILT – EDGED BONDS

LOW – GRADE BONDS

GOVT. OF INDIA – 8.00%

SAVINGS BOND

INVESTMENTS• An investment is the sum of money that one has paid to an agency for safekeeping

and earning interest• Investing may be defined as “ Committing money for the purpose of assets,

based on a careful analysis of risks and rewards anticipated over a period of one year or more”.

• Investing funds is the process of placing them in a more or less permanent from, with the expectation of assuring the security of the principal and of receiving a regular and predictable return on it.

OBJECTIVES OF INVESTMENT

• Security after retirement• Education children• Building up an estate• Improving status and standard of living

TYPES OF INVESTMENTS

JEWELLERY PROPERTY DEBENTURESSHARES

SHARES

• The share capital of a company is divided into small parts and each part is known as a ‘share’• Share is one of the units into which the total capital of the company is divided• Shares are also known as “ownership securities” and share capital as the “owned capital”• A company share is a movable asset and can be brought and sold by people • The value written on the share is known as its “face value” or “nominal value”• However the market value of shares increases or decreases and is therefore not mentioned on

the share certificate• A share holder is the part owner of the company. He is given a share certificate mentioning the

number of shares purchased by him. He has no liability after paying the full value of the share

SHARES CTD..

• Annual reports are issued to share holders informing them about the company’s performance

• The annual general meeting is used to discuss and pass company accounts, elect company directors and approve dividends.

TYPES OF SHARES

EQUITY SHARES

PREFERENCE SHARES

PREFERENCE SHARES

Cumulative and Non –

Cumulative

Redeemable and

Irredeemable

Participating and non

participating

Convertible and non -

convertible

DEBENTURES

• Debentures are instruments for raising long – term debt capital• Debentures is an acknowledgement given by the company in respect of the amount

received from debenture holders• Debenture holders are the creditors of the company• The obligation of the company towards its debenture holders is similar to that of a

borrower who promises to pay interest and capital at specified time.

TYPES OF DEBENTURES

Secured and Unsecured

Redeemable and

Irredeemable

Convertible and Non

ConvertibleBearer and Registered

THANK YOU!