What is Savings?

S5-SA4-0043

Grade Level:

Class 8

Law, Civic Literacy, Economics, FinTech, Geopolitics, Personal Finance, Indian Governance

Definition

What is it?

Savings is the part of your income or money that you choose not to spend immediately. Instead, you put it aside for future use or to achieve specific goals, like buying something big or for emergencies.

Simple Example

Quick Example

Imagine your parents give you ₹100 for school lunch and snacks for the week. If you only spend ₹70 and keep ₹30 aside, that ₹30 is your saving. You can use it later to buy a new cricket ball or a comic book.

Worked Example

Step-by-Step

Let's say Rohan gets ₹500 every month as pocket money. He wants to buy a new video game that costs ₹2000.
1. Rohan decides to save ₹150 from his pocket money each month.
2. In the first month, he saves ₹150.
3. In the second month, he saves another ₹150. Total saved = ₹150 + ₹150 = ₹300.
4. He continues this for several months.
5. After 10 months, Rohan will have saved ₹150 x 10 = ₹1500.
6. He still needs ₹2000 - ₹1500 = ₹500 more.
7. If he saves ₹150 for 4 more months (₹150 x 4 = ₹600), he will have ₹1500 + ₹600 = ₹2100.
8. Rohan will have enough money to buy his video game in 14 months and even have ₹100 left over! --- Answer: Rohan will reach his goal of ₹2000 in 14 months.

Why It Matters

Understanding savings is crucial for managing your money wisely, which is a key part of Personal Finance and Economics. It helps you plan for the future, whether it's for higher education, starting a business, or even contributing to national development through investments. Many careers like financial advisors, bankers, and even government policy makers use these concepts daily.

Common Mistakes

MISTAKE: Thinking savings is only for rich people or adults. | CORRECTION: Anyone can save, no matter how much money they have. Even small amounts saved regularly add up over time.

MISTAKE: Spending all your money first and then trying to save what's left. | CORRECTION: A better approach is to 'pay yourself first' – set aside a portion for savings as soon as you receive money, then spend what's remaining.

MISTAKE: Saving money without a clear goal. | CORRECTION: Having a specific goal (like buying a cycle or for college fees) makes saving more motivating and helps you decide how much to save.

Practice Questions

Try It Yourself

QUESTION: If you earn ₹200 per week and spend ₹120, how much do you save? | ANSWER: ₹80

QUESTION: Priya wants to buy a new storybook that costs ₹350. She saves ₹50 every week. How many weeks will it take her to save enough money? | ANSWER: 7 weeks

QUESTION: Rohit receives ₹1000 as a gift. He decides to save 30% of it and spend the rest. How much money does he save, and how much does he spend? | ANSWER: Saves ₹300, Spends ₹700

MCQ

Quick Quiz

Which of the following best describes 'savings'?

Money that you spend immediately on needs and wants.

Money that you borrow from someone else.

Money that you put aside for future use instead of spending now.

Money that you invest in the stock market only.

The Correct Answer Is:

Option C correctly defines savings as putting money aside for future use. Options A and B describe spending and borrowing, respectively. Option D describes a specific type of investment, which is one way to use savings, but not the definition of savings itself.

Real World Connection

In the Real World

In India, many people use bank accounts or digital wallets like Paytm and Google Pay to save money. Families often save for big events like weddings, children's education, or buying a home. The government also encourages savings through schemes like Public Provident Fund (PPF) or Sukanya Samriddhi Yojana, which help people achieve long-term financial goals.

Key Vocabulary

Key Terms

INCOME: Money received, especially on a regular basis, for work or through investments. | SPENDING: The act of using money to buy goods or services. | GOAL: A desired result that a person or a system plans and commits to achieve. | EMERGENCY FUND: Money set aside for unexpected expenses, like medical bills or sudden repairs.

What's Next

What to Learn Next

Now that you understand what savings are, the next step is to learn about 'Budgeting'. Budgeting helps you plan how to use your income, making it easier to save effectively and achieve your financial goals. It's like having a map for your money!