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Why Is Saving Important?

Savings are money or other assets kept over a period of time, usually not to be consumed immediately but in the future.

Savings can be kept in a bank or any other safe place where there is no risk of loss or spending.

There are many advantages to saving when you run a business. Saving funds allows to:

  • provide for specific needs in the future;
  • have access to monetary or other assets whenever needed;
  • ensure financial independence;
  • make one’s own resources inaccessible for others without one’s approval;
  • safely store surplus;
  • acquire skills for proper money management and self-discipline;
  • qualify for certain types of loans.

In depth…

Savings can be done through:

  • Small but regular deposits – this happens when you decide to sacrifice current consumption (use of assets, e.g. of money and goods) in order to increase the availability of assets for future consumption. It therefore involves postponing expenditures in order to accumulate a sizable amount of resources for future use.
  • Automatic deductions from salaries, wages or income – this type of saving is not voluntary. It is a system used by most employers under the labor law.

There are several possible forms of saving:

  • Informal saving: Savings societies, village banking
  • Traditional forms of saving: Buying assets (e.g. houses, animals, art works), holding cash in “safe” places, such as pots or mattresses.
  • Formal savings: Bank savings account; savings account with micro-finance institutions.

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