MANAGEMENT OF PERSONAL AND FAMILY FINANCIAL RESOURCES SAVINGS & INVESTMENTS

• Financial management


  The science or practice of managing money or other assets
• Financial management


  • Requires systematic and disciplined thought and action
  • Saving money, rather than spending it, requires self discipline and control, the ability to set goals and a willingness to put future needs before current needs
• Financial security


  The ability to meet day to day obligations, while planning, saving and investing to achieve future financial goals
• A family's level of living and financial stability is determined more by the spending pattern than the size of the income
• Stages of the family life cycle


  • Young single person living alone
  • Young married couple with no children
  • Young married couple with a child/children
  • Older married couple with dependants
  • Older married couple with no dependants
  • Older married couple who are retired
  • Older person, single survivor/divorce

  
• Categories of family spending

  • Food
  • Clothing
  • Shelter
  • Medical bills
  • Entertainment
  • Transportation
  • Education
  • Cleaning items
  • Toiletries
  • Investment
  • Repairs and Maintenance
  • Gambling
  • Furnishings and Appliances
  • Literature
  • Miscellaneous
• Money management


  The application of financial resources to achieve goals. It involves using money and management skills
• Budgeting


  Necessary for utilizing financial resources
• Functions of financial management

  • Creates independence
  • Ensures maximum utility of money
  • Ensures that satisfaction is derived from the money spent
  • Ensures that you are living within your means
  • Ensures that expenses do not exceed your income
  • Helps to set and reach goals
• If income is steady or increased


  Expenditure may continue at the same level or increase. If the latter occurs, the economy tends to provide more goods and services to satisfy needs and the economy benefits
• If income increases and spending remains the same


  There is savings from the money left over all the expenses or unspent money
• Forms of financial management

  • Savings and Investments
  • Budgeting
  • Consumer Credit
  • Insurance
• Cash management process


  1. Awareness

  2. Analysis

  3. Action
• Wealth protection - cash management

  • Strategies include budgeting, keeping financial records, maximizing the interest earned on savings and chequing accounts
  • Regularly preparing financial statements – Net worth and cash flow
  • Spend less than you earn
  • The key to cash management is effective record keeping
• Emergency cash reserve


  Having an emergency fund
• Risk management


  We must prepare for financial risk – financial loss, accident, illness, death, property damage – Insurance
• Tax management


  • Pay As You Earn – PAYE
  • Deductions and Tax Refunds
• Wealth accumulation


  • Financial Goals
  • Credit Management
  • Home Ownership
  • Investments
  • Children's Education and Retirement Planning
• If all the strategies outlined in the pyramid were successfully implemented, then you should have assets which will be distributed
• Classes of financial institutions

  • Commercial Banks
  • Credit Unions
  • Brokerage Firms
  • Savings and Loans Associations
• Savings


  Money not spent on consumption
• Savings


  • An important resource in times of financial trouble
  • Serve as a cushion against financial & medical emergencies
  • A way to accumulate funds e.g. Retirement and major purchases
  • Useful as collateral when required to secure loans
• Disadvantages of savings


  • Loss of money value during periods of inflation
  • Penalty on deposit if the balance amount falls below a specified or stipulated amount
• Major savings goals


  • Down payment on a house
  • Down payment on a car
  • Education
  • Travel / Vacation
  • Health
• Sou Sou


  A group of people getting together to agree to pay a specified amount of money for each specified period. Each member of the group receives the total sum collected on a rational basis
• Cash pan


  Any vessel kept in the home for the purpose of accumulating money in cash form
• Savings / Share Accounts

  • Low interest earning accounts
  • Low risk
  • Easily accessible
  • First step in investing
  • Helps develop a pattern of saving
• Regular Savings Account


  • Simplest form of savings using hardcopy records or online services
  • Offered by all institutions (banks, credit unions, etc.)
  • Generally, a low minimum deposit is required and can be attended to at any time
  • Interest is low and varies based on time, deposit and institution
  • Penalty may be incurred if the balance falls below a specified amount
  • Savings account carries a service charge
• Fixed Deposits


  • A fixed sum of money is deposited for a fixed period of time at a fixed rate of interest
  • Interest rates are higher than a savings account
  • A fixed deposit incurs a penalty if withdrawals are made before the fixed and specified period
• Current / Chequing Accounts

  • An account in which deposits and withdrawals can be made at any time
  • Cheque-books are provided for these accounts and a service charge is involved
  • Chequing with interest involves interest being charged at a stipulated rate but the balance must not fall below a certain figure in order to receive the stipulated interest
• Making savings grow


  Savings grow based on the amount put in, the interest rate, the frequency that interest is compounded, and the policies regarding deposits and withdrawals
• Investments


  Money spent to purchase other forms of wealth which are expected to yield
• Fixed deposit


  • A fixed sum of money is deposited for a fixed period of time at a fixed rate of interest
  • Interest rates are higher than a savings account
  • A fixed deposit incurs a penalty if withdrawals are made before the fixed and specified period
• Current/Chequing account


  • An account in which deposits and withdrawals can be made at any time
  • Cheque-books are provided for these accounts and a service charge is involved
  • Chequing with interest involves interest being charged at a stipulated rate but the balance must not fall below a certain figure in order to receive the stipulated interest
• Savings growth


  • Depends on the amount put in
  • The interest rate
  • The frequency that interest is compounded
  • The policies regarding deposits and withdrawals
• Investment


  • Money spent to purchase other forms of wealth which are expected to yield subsequent income in cash, either in the form of dividends, interest or capital gains
  • Savings are used to purchase Investments
  • Investments are the key to long-term financial success
• Purpose of investments


  • To make money so that there is more to spend, save and reinvest
  • To promote long term savings
  • To achieve long term goals as homes, education and retirement
  • To increase current income
  • To gain wealth and financial security
  • To obtain higher (interest rates) returns on savings
• Disadvantages of investment include a high degree of risk involved
• The minimum deposit insurance coverage is $125,000 effective January 2012. Beyond this may not be recovered by the Deposit Insurance Coverage.
• The Deposit Insurance Corporation of Trinidad and Tobago (DIC) plays a major role in maintaining stability of the financial system. Its main function is to manage a fund to provide insurance protection for depositors against the loss of their deposits, should a financial institution fail.