#9# Develop and use saving plan

Learning Objectives:
1. Discuss the place of saving and investing today
2. Understand risk as it relates to saving and investing
3. Implement your own savings plan
4. Develop your own savings plan

LO:-1.Discuss the place of saving and investing today

INTRODUCTION TO SAVING
Saving is it refers to an individual,house hold, organization .group members save amount money based
on income for the future life. On other hand to fulfill the personal need financial goals.
It is withholdingsame thing valuable for the future this means:
 Discipline and sacrifice :- with holding something valuable for future use instead of
consuming it immediately
 Planning for future: saving is necessary for all about future preparing all events like risk and
un expected occurrence and other types of payment (for education, fuel, marriage etc.)
 Change standard of live:- Basic needs and wants to luxury good.
 Managing our money:- monitoring and controlling future investment.

Savings is the portion of income not spent on current expenditures. Because a person does not know what
will happen in the future, money should be saved to pay for unexpected events or emergencies. An
individual’s car may breakdown, their dishwasher could begin to leak, or a medical emergency could
occur. Without savings, unexpected events can become large financial burdens. Therefore, savings helps
an individual or family become financially secure.

Money can also be saved to purchase expensive items that are too costly to buy with monthly income.
Buying a new camera, purchasing an automobile, or paying for a vacation can all be accomplished by
saving a portion of income.
The impact of increasingly high cost of living in society is discussed using examples from the domestic
environment
Increasing levels of consumer debt in Ethiopia are discussed with reference to relevant current issues.
Consumer debit refers to outstanding debit of consumer, as opposed to that of businesses or government
in micro economic terms; it is debit which is used to fund consumption rather than investment, it incurred
on purchase of goods that are consumable.
Consumer debt may include
  credit card debt
 mobile telephone debt
 mortgages on residential and investment properties
 personal loans to purchase:
o motor vehicles
o travel
o domestic white goods
 store credit
 Student loans including the Higher Education Contribution Scheme.
The importance of setting financial goals and developing a saving and investment plan at different stages
of an individual's life is analyzed and discussed
Financial goals may includes
 accumulating a set amount of money by a specified date in the future for the purposes of:
 purchasing assets
 financing holidays, educational expenses, home renovations and other known future
expenses
 establishing a deposit for an investment such as a home or investment property
 aiming to repay existing debts and be debt free
 establishing a regular savings plan
 Handling income and expenditure responsibly and avoiding financial difficulties
Different attitudes to savings and investment are analyzed and discussed and the individual's own
spending habits are explored
Attitudes to savings and investment:
 believe it is essential in order to manage their money and achieve future financial goals
 lack interest in or the discipline to save and therefore live from one pay packet to the next
 Occasionally think about saving but who do not take active steps to save
WHERE CAN MONEY BE SAVED?
Traditionally, what would you do to keep your money safely where you live in the ancient world where
there were not modern banks? Well most of us would look for a place which safe- safe from theft,
fire, flooding, or similar risks. In the old day, people used to entrust their spare money to goldsmiths,
merchants and money lenders for two reasons.
 1st they have safe places to put their gold, silvers and other valuables.
 2nd these were peoples of honor and creditworthy people.
LO:-2.Understand risk as it relates to saving and investing
Saving and investing are important parts of your financial plan. What you save and invest should help you
reach your financial goals. But all investments come with risk. Investments offering potentially higher
expected returns also expose you to a higher risk of losing money
The concept of risk and risk versus return is explained and demonstrated
 the higher the risk of the investment, the higher the expected return
 The lower the risk of the investment, the lower the expected return
An individual's risk profile is determined based on current and future requirements and the
individual's level of risk aversion
 The level of risk an individual is comfortable with when investing the money.
The impact of inflation on the earnings power of money is identified, assessed and discussed.
 the cost of living, indicated by the inflation rate
 The percentage change in the Consumer Price Index which is a quarterly survey of the retail
price of a basket of goods and services consumed by the general population.
LO:-3.Develop your own savings plan

Personal savings goals are identified and quantified into dollar amounts and arranged in order of
priority
Goals may includes
 Specific
 measurable
 achievable
 realistic
Timely
A personal budget is developed to reveal funds available to contribute towards savings goals
The range of financial product options available to maximize earnings on savings are.
Investigated and the most appropriate is selected according to own requirements
 basic savings account
 cash management trusts
 fixed term deposits
 investments in debentures and secured and unsecured stock
 Online bank accounts offering higher rates of return
Requirements to consider when selecting a financial product for savings or investment may include:
  account keeping fees, ongoing fees and charges and other non-government fees and
charges
 additional services offered
 ease of access to funds
 level of risk involved
 locality of the institution
 minimum opening balance required
 potential tax implications
 rate of interest earned
 reputation of the financial institution
 Term to maturity.
LO4:-Implement your own savings plan
The requirements to open an account and provide evidence of personal identity are researched and steps
taken to gather the necessary documentation

A savings account is anaccount with a depository institution that holds money not spent on current
expenditures. Money can be kept in a savings account until the owner needs to use it for emergencies or
to purchase expensive items.
Relevant savings accounts or other investigated financial products are opened and the savings plan
implemented and monitored for a short period of time
Adjustments to the savings goal are made where it is realized that the goal is unattainable
The requirements to open an account include providing personal identification from a range of sources
which may comprise but not limited to:
 Kebele/woreda ID cards;
 Farmers associations’ ID cards;
 Employment and pension ID cards;
 School, college and university ID cards;
 Driver’s/operator’s licenses;
 Tax identification ID card;
 Passports;
 Work or residence permits; and
 Foreign-nationals-of-Ethiopian-origin ID card, together with a valid passport.
 Ethiopian Community ID.