Savings (Junior Cert Business Studies): Revision Notes

Savings

Why people save money

Understanding why people choose to save money is fundamental to managing your personal finances effectively. People save for many different reasons, depending on their personal circumstances and what stage of life they're in.

Here are the main reasons why people choose to save money:

For planned future expenses

• People save to cover costs they know are coming, such as annual car insurance payments or school expenses
• This helps spread the cost of large bills over time, making them more manageable

For wants and goals

• Many people save to afford something special they want, like a holiday or new gadgets
• Saving allows people to buy these items without going into debt

For major purchases

• Large purchases like putting a deposit on a house or buying a car require substantial savings
• These goals often take months or years of regular saving to achieve

For unexpected expenses

• Having money saved provides security when unplanned costs arise, such as medical bills or emergency home repairs
• This type of saving acts like a financial safety net

For peace of mind and future security

• Saving money reduces financial stress and worry about money
• People also save for long-term goals like retirement
• Having savings means you're less likely to need to borrow money frequently

To earn additional income

• Money that's saved properly can earn interest, providing extra income over time

Money-saving tips

Creating a budget is the foundation of good saving habits, but there are many other practical strategies you can use to save more money each month.

Reduce discretionary spending

• Cut back on non-essential purchases like entertainment, dining out, or expensive hobbies
• This doesn't mean eliminating fun entirely, but being more selective about how you spend

Cancel unused subscriptions

• Review monthly subscriptions like gym memberships, streaming services, or magazine subscriptions
• Cancel any that you're not actively using or getting value from

Choose cheaper payment methods

• Use debit cards instead of credit cards when possible to avoid interest charges
• Compare different payment options before making purchases

Compare service providers

• Shop around for better deals on utilities like electricity, gas, and mobile phone contracts
• Switching providers can often save significant amounts each year

Make smart choices about major expenses

• Consider the long-term costs of big purchases, not just the initial price
• For example, some cars have much lower running costs, tax, and insurance than others, even if they cost more initially

These tips work best when combined with a clear savings goal and regular review of your spending habits.

Deposit accounts

While keeping cash in a piggy bank or jar at home might help you save, it doesn't earn you any additional money. To make your savings grow, you need to save with a financial institution like a commercial bank.

When you put your money into a bank account, two important things happen. First, your money is kept safe and secure. Second, the bank pays you interest, which means your savings actually grow over time.

Banks offer special accounts designed specifically for saving money. These are called deposit accounts. The way deposit accounts work is straightforward: you deposit (put in) your money, and the bank rewards you by adding interest to your savings balance.

The amount of interest you earn depends on factors like how much you save, how long you leave it in the account, and the interest rate the bank is offering.

Different banks offer different types of deposit accounts with varying features, so it's worth comparing options to find the account that works best for your saving goals.