With the help of personal savings tools, individuals or families can save substantial amount of money both in the long and short term. However, personal savings may involve a number of financial risks and contingencies.
For the purpose of personal financial planning and personal savings, the following five steps are necessary:
- Execution of the plan
- Monitoring and re-evaluation
The various personal savings schemes can be categorized into the following types:
Savings and checking accounts: Savings accounts are held by savings and loan associations, mutual savings banks, credit unions and commercial banks. In this type of account interest is paid, however the account cannot be directly utilized in the form of money. Every financial transaction in a savings account is recorded in a bank statement or a passbook. Cash can be withdrawn from a savings account with the help of an ATM card or debit card or by visiting a branch.A checking account is known by different names. It is termed as transactional account and in Northern America, it is known as chequing account or checking account. In the United Kingdom and a number of other nations, it is known as cheque account or current account. It is basically a deposit account, which is kept at a bank or any other type of financial services provider. The principal objective of checking accounts is to offer instant availability of cash on demand by a number of ways. As money is offered on demand, checking accounts are also termed as demand deposit accounts or demand accounts. Checking accounts are quite helpful for commercial enterprises and business owners or entrepreneurs because they deal with voluminous financial transactions on a day-to-day basis.
A checking account permits the accountholder to obtain or make payments with the help of the following devices:
- Banknotes or cash money
- Giro (Direct deposit or funds transfer)
- Money order and cheque
- Standing order
- Direct debit
- Debit card or ATM card
- SWIFT (Global account to account transfer)
Management of income tax: Proper personal income tax management leads to a lot of savings. Tax professionals working under various companies help out individuals regarding the payment of tax, how to avail tax benefits and tax exemptions, and this contributes towards personal savings.
Stock market investments: Stock market investments can result in considerable amount of personal savings, if money can be invested in stocks of profit making and prosperous companies.
Social security benefits: It is also known as social welfare service and offers protection from a number of circumstances, which include disability, poorness, unemployment, and old age. The different devices related to personal savings offered by social security are income maintenance, social insurance, and social protection.
Mutual fund investments: These are useful personal savings devices in the form of collective investment schemes where fund managers collect money from the investors and invest in bonds and stocks of reputed companies.
Insurance policies: Insurance policies also function as helpful tools of personal savings, because they provide protection from unforeseen events. Insurance can be broadly categorized into life insurance and non-life insurance or general insurance. Insurance is also regarded as a type of risk management.
Besides these, the financial services providers also provide some additional services associated with personal savings and they are the following:
- Retirement fund allocation
- Enhancement of credit rating
- Arranging for tax benefits
- Personal asset protection
