Saving and insurance

Savings are money kept for future needs. Keeping money at home brings no income, so it can be placed as a deposit in a licensed bank: the bank uses your money and pays interest for it. Annual deposit profit = deposit amount · annual rate : 100; the monthly profit is one twelfth of the annual profit, and for several months we multiply the monthly profit by the number of months. When choosing a bank, two criteria matter: profitability and reliability; if a very high interest is promised without guarantees, it is a warning sign. The enemy of a deposit is inflation: if prices rise in general, money loses purchasing power. In insurance, a person regularly pays premiums to an insurance company and, if an unexpected event (a fire, an illness) happens, the company covers the loss. Saved money can also be directed into investment – setting up a business or buying shares – but investment carries a risk of losing money, so only knowledgeable adults take such decisions. Never believe those who say “your money will double in a week”: such offers are often a financial pyramid – a fraud in which earlier participants are paid from the money of newcomers, and in the end people lose.