Savings and investments

The powerpoint is about the different savings and investments tools used in India to be known by Under Graduate students.

1. SAVINGS AND INVESTMENTS Ms. Roma Gandhi Dr. BMN College of Home Science NAAC Accredited ‘A’ Grade CGPA 3.64/4 UGC Status: College for Potential of Excellence INDIA

2. 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”.

3. 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

4. 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

5. SAVING Compulsory Voluntary Provident Fund GPF CPF PPF Bonds Banks Post Office Insurance UTI Schemes TYPES OF SAVINGS

6. 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

7. 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.)

8. VOLUNTARY SAVINGS BANKS 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

9. FUNCTIONS OF BANKS TO ACCEPT/RECEIVE DEPOSITS SAVINGS BANK ACCOUNT CURRENT ACCOUNT BANKERS CHEQUE/PAY OREDERS FIXED DEPOSIT ACCOUNT RECURRING DEPOSIT ACCOUNT CASH CERTIFICATES CREDIT CARDS SAFE DEPOSIT VAULTS/ LOCKERS

10. ADVANCING LOANS BY ALLOWING AN OVER DRAFT TRANSFER OF MONEY DISCOUNTING BILLS OF EXCHANGE/ HUNDIES BY CREATING A DEPOSIT

11. 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

12. 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

13. 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

14. 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.

15. 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.

16. 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

17. KINDS OF LIFE INSURANCE POLICIES ENDOWMENT POLICY GENERAL INSURANCE WHOLE LIFE POLICY MONEY BACK POLICY FIRE INSURANCE MARINE INSURANCE

18. GENERAL INSURANCE MOTOR INSURANCE SOCIAL INSURANCE LIABILITY OF EMPLOYERS FIDELITY INSURANCE PERSONAL ACCIDENT INSURANCE ANTI – THEFT, ROBBERY INSURANCE

19. 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.

20. TYPES OF BONDS GILT – EDGED BONDS LOW – GRADE BONDS GOVT. OF INDIA – 8.00% SAVINGS BOND

21. 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.

22. OBJECTIVES OF INVESTMENT Security after retirement Education children Building up an estate Improving status and standard of living

23. TYPES OF INVESTMENTS JEWELLERY PROPERTY DEBENTURES SHARES

24. 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

25. 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.

26. TYPES OF SHARES EQUITY SHARES PREFERENCE SHARES

27. PREFERENCE SHARES Cumulative and Non – Cumulative Redeemable and Irredeemable Participating and non participating Convertible and non - convertible

28. 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.

29. TYPES OF DEBENTURES Secured and Unsecured Redeemable and Irredeemable Convertible and Non Convertible Bearer and Registered

30. THANK YOU!