Savings plan

Savings plan
See also
Income stream Savings club Equalization payment Finance company Microfinance institution Committed capital Cost of money Eurocredit Fully funded

Savings plan is a type of investment in which investor contributes money on regular basis. Thanks to regular payments the money on the account increases and the investor reaches the long-term or short-term financial goal. Savings plans are often provided by employers that let employees to set aside some of their wages. Such a saving plans are in some countries free from tax if they are long-term saving plans.

Savings plans can be set for a purpose, e.g. to finance college education for children. Country or state government can offer tax incentives to motivate to save for certain purposes. For example, in U.S. the most popular is 529 plan - the college savings account that families use to save and pay for education on a tax-free basis.

Savings problem

The most savings are collected for the future. The big problem and also the important goals are to estimate future amount of our present deposits and calculate deposits which we need to regular postponing(I. Owadally 2011, s.2).

Whole this amount is individual. It is depends on the our savings destination. Some people could save money for children schools, another for old age=addition to the pension. For savings it is need to choose the place where we can postpone deposits.(I. Owadally 2011, s. 2).

Investors who do not want to risk could deposit savings on bank account. Opposite investors who like risk could invest in shares(I. Owadally 2011, s. 2).

Economy

Private savings from all of us have positive influence on the economy the whole country. It increase productivity and make economic growth. The government should be interested in increasing individual savings. It could help prevent crisis. Crisis which could be caused by financial factors. It should be possible to achieve financial knowledge. People need to have possibility to make savings plan and to learn about financial instruments(N.S. Mahdzan 2013, s. 42).

Gender Differences

Study shows that men and women make different decisions about savings plan. Women are less risky. They are more often decide to invest in savings plan in their company. Men on the contrary willingly save large amount. Decisions about savings are depends on investor's age, amount of his salary, his education and financial research regarding his financial possibilities(N. Aubert 2010, s. 16).

Employees who know more about investing, have higher competences could postpone their savings outside their company. They know more than other employees who do not want to risk and make decision to use the ready savings plan in their company(N. Aubert 2010, s. 17).

References

• Aubert, N., Rapp, T. (2010).Employee’s investment behaviors in a company based savings plan. Revue de l'association française de finance, vol. 31, n° 1/2010 (pp.16-17)
• Beshears, J., Choi, J. J., Laibson, D., & Madrian, B. C. (2010). The impact of employer matching on savings plan participation under automatic enrollment. In Research findings in the economics of aging (pp. 311-327). University of Chicago Press.
• Mahdzan, N.S., Tabiani, S. (2013). The Impact of Financial Literacy on Individual Saving: an Exploratory Study in the Malaysian Context. Transformations in Business & Economics, Vol. 12, No 1 (28), (pp.42)
• Owadally, I., Haberman, S., & Gómez Hernández, D. (2011). A savings plan with targeted contributions. The Journal of Risk and Insurance, Vol. 80, No. 4 (pp.2 )

Author: Jolanta Guz