Saving


Some people do not spend all of their income. They may save or invest what is left over to prepare for a later stage of life.


Reasons Households Save Money Reason


Explanation


To pay for future planned expenditure or major life events


To deal with emergencies


To improve a person’s credit rating


To provide income in retirement


People save money so they can afford large expenses in the future without having to borrow.


Savings can be used to pay for unexpected costs, so the person does not have to borrow money.


Regular savings show a bank that a person can manage their money and could make similar repayments on a loan.


Money is deducted from income and paid into a pension until a person retires. This money is then used to provide an income when they retire.


To earn interest Money saved in a bank account can earn interest, increasing its value.


EXAM CORNERINTRO ACTIVITY


2022 Q18 (c) (i) Now that Kevin has a steady income, he has decided to start saving. List three reasons for saving. For future planned expenditure e.g. family event, buy a car. For emergencies/unplanned events e.g. in case a car breaks down. Other: To earn interest / For retirement / to improve his credit rating.


The verb used in each question will change the way you need to answer it in your exam. ‘List’ is used above, which means you don’t need to develop your answer.


If ‘explain’ was used, your answer would need more development: TOP TIP


E.g. Someone might put money aside in case their car breaks down. Having extra money saved means they won’t have to apply for a loan to cover the repair costs.


Examples


Saving for a deposit for a house, a wedding, or a child’s college costs.


Paying for car repairs if a car breaks down.


Showing the ability to save €200 every month shows a bank that a person could afford a similar loan repayment.


Individuals can build a private pension fund to provide them with an income when they retire.


€10,000 saved at 3% will earn €300 interest in a year.


37


STRAND 1


CHAPTER 5: Saving and borrowing for a household


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