FINANCE: Two methods of saving

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Yusuf Boluwatife




Saving simply means keeping current income for future purposes. It could be for expenses or investments.

Recall BlackBox Nigeria had shared tips on wise money spending tips — including saving. In this piece, we outline two methods of saving you can adopt.

Flunctuating savings method

This method of savings explains that the periodic amount to be saved by an individual solely depends on the amount he/she earns for that period. For example, if Mr A earns N50,000, his savings for the month could be N5,000. However, when he earns lower e.g. N20,000, the savings also reduces to N2,000.

Simply put, the higher the earnings the higher the savings. This method is particularly useful for business owners or entrepreneurs as their income vary most times.


Statutory method of savings

This involves having a fixed amount to be saved over a certain period of time — daily, weekly, or monthly. It includes fixed deposits, contributions, etc. This method is the direct opposite of the flunctuating method of saving, and is mostly advisable for salary earners as their pay is fixed.

For example, if an individual earns N50,000, his savings is N10,000. Even if he earns higher or lower, the savings remains the same.

However, no working class person has a fixed rate of expenses (to settle bills) since the prices of good and services change. This affects the amount left from the monthly pay, and by extension, savings.

Note: For the sake of this piece, “earnings” was referred to as the amount left after expenses have been deducted. Originally in accounting terms, earnings are the income gotten by a company or an individual over a specific period of time.




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