What are savings and how are they built up?

Q: What are savings?

Savings are money that is not spent today but put aside for a later goal. In the first lesson we saw that money can be kept for later. Saving means using this possibility on purpose: "I will spend this money not now, but on a certain thing." Savings are not an expense. The money has not left you. It is still yours, it is just waiting in another place.

Q: How can saving be made easier?

Mohinur's father gave her three rules (practical advice): Put aside first, spend afterwards. On the day the pocket money comes, put 30 000 soum in a separate place straight away. If you plan to save whatever is left at the end, nothing will be left. Write the goal down clearly. Not "I will save money", but "900 000 soum, for a bicycle". Keep track of your progress. Every week write down in a notebook how much has been collected. Seeing it grow gives you strength.

Q: Where can savings be kept?

At home, in a box. It is always at hand, but it can get lost and does not grow by itself. In a bank, as a deposit. The bank keeps your money and usually pays you a charge (interest) for it. This is the opposite of the situation in the eighth lesson: this time it is as if you lend money to the bank. Do not forget one more thing: if prices rise over time, the money you have saved buys less than before. So keeping savings that are collected over a long time only in a box is not always a good idea.

Mohinur is in the sixth grade. A classmate started coming to school on a new bicycle, and Mohinur wanted a bicycle like that too. In the shop it costs 900 000 soum. Her father said: "I will not just give you the money, but I will teach you how to save it."

What are savings?

Savings are money that is not spent today but put aside for a later goal.

In the first lesson we saw that money can be kept for later. Saving means using this possibility on purpose: "I will spend this money not now, but on a certain thing."

Savings are not an expense. The money has not left you. It is still yours, it is just waiting in another place.

When will the goal be reached?

Mohinur gets 50 000 soum of pocket money every week. She wants to put part of it aside. For example (the figures are hypothetical), let us calculate how many weeks it takes, depending on how much she puts aside:

If she puts aside every week	How many weeks to collect 900 000 soum
10 000 soum	900 000 ÷ 10 000 = 90 weeks
20 000 soum	900 000 ÷ 20 000 = 45 weeks
30 000 soum	900 000 ÷ 30 000 = 30 weeks

Mohinur chose 30 000 soum: that leaves her 20 000 soum a week for her everyday needs.

Then, at a holiday, her relatives gave her 150 000 soum as a gift. She added this money to her savings too. Now the part still to be collected is 900 000 − 150 000 = 750 000 soum. And that is 750 000 ÷ 30 000 = 25 weeks. One gift brought the goal five weeks closer.

How can saving be made easier?

Mohinur's father gave her three rules (practical advice):

Put aside first, spend afterwards. On the day the pocket money comes, put 30 000 soum in a separate place straight away. If you plan to save whatever is left at the end, nothing will be left.
Write the goal down clearly. Not "I will save money", but "900 000 soum, for a bicycle".
Keep track of your progress. Every week write down in a notebook how much has been collected. Seeing it grow gives you strength.

Why does a family save?

Adults have different goals. Sometimes the fridge breaks down, someone falls ill or the salary is late. Money saved for such a day is called a reserve.

For example (the figures are hypothetical), a family's expenses for one month are 6 000 000 soum. They set the goal of saving a reserve that will last two months: 6 000 000 × 2 = 12 000 000 soum. If they put aside 500 000 soum every month, it will take 12 000 000 ÷ 500 000 = 24 months, that is, two years.

A family with a reserve does not look for a loan when an unexpected expense comes up. You know from the last lesson: a debt has to be paid back, and with a bank loan there is also a charge on top.

Where can savings be kept?

At home, in a box. It is always at hand, but it can get lost and does not grow by itself.
In a bank, as a deposit. The bank keeps your money and usually pays you a charge (interest) for it. This is the opposite of the situation in the eighth lesson: this time it is as if you lend money to the bank.

Do not forget one more thing: if prices rise over time, the money you have saved buys less than before. So keeping savings that are collected over a long time only in a box is not always a good idea.

In the next lesson

In the tenth Basics lesson we will get to know the main income of many families: what wages are and how they are calculated.

Test yourself

5 questions on this topic: pick an option or reveal the answer.

The founder of the "Nurli ufq" training center deposits 1 000 000 soum into a savings account at the end of each year for 3 years. The account earns 10% annual compound interest (interest is added at the end of each year). How much money will be in the account after the last deposit at the end of the third year (future value of an ordinary annuity)?

The Oltin tola sewing workshop wants to buy a new sewing machine today for 10 000 000 soums. The machine will bring an additional cash flow of 6 600 000 soums at the end of year 1 and 7 260 000 soums at the end of year 2. The discount rate is 10% per year. What is the project's net present value (NPV = sum of discounted inflows − initial investment)?

According to the "time value of money" concept in finance, 1 000 000 soum today is worth more than 1 000 000 soum to be received a year from now. What is the main reason for this?

A joint-stock company's annual net profit is 90 mln soum, of which 10 mln soum is directed to dividends on preferred shares. The weighted average number of ordinary shares outstanding during the year is 40 000. What are the earnings per ordinary share (EPS = (net profit − preferred dividends) / number of ordinary shares)?

"Yangiyo'l savdo" LLC bought 40 bonds with a par value of 100 000 soum each for a total of 3 880 000 soum, with 6 months left until redemption (hypothetical amounts). Under its accounting policy, the difference between par value and purchase cost is spread evenly over the months. Under paragraph 241 of NAS No. 21, how is one month's share recorded?

Answered: 0 / 50 of 5 correct

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