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Thursday, 26 May 2016

Savings

What does it mean by savings?

According to Keynesian economics, Savings is the amount left over when the cost of a person's consumer expenditure is subtracted from the amount of disposable income he earns in a given period of time.

For example, Swati’s monthly paycheck is Rs. 42,000. Her expenses include a  Rs. 15,000 rent payment, Rs. 10,000 student loan payment,  Rs. 3,500 for groceries, Rs2,500 for utilities bills like cellphone , electricity and gas etc. So she has monthly expenses are Rs. 31,000 (15,000+10,000+3,500+2,500). This means she is left with Rs. 11,000 (42,000-31,000). So we can take it as her savings in a month.

One regular question we come across that why we should save if we are sure that we would get our paycheck in next month as well? Suppose if there is any emergency and Swati has an emergency then these saving will help her to live while resolving the issue.

Savings are also play very important role to increase our income if we invest them properly. We can also achieve a financial goal which seems very difficult when we start our earning.

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