Savings defines the part of income which is not spent. Savings which is economic variable defines quantifies a person’s physical quality of life and standards of living. Proper banking is effective to improve one’s standards of living. It is the obligations of banks to become creative and create an efficient banking environment in the financial market. Implementing saving habits during the earlier days assist a person and family to attain a more stable life than a person who has no savings (Cummings 2). Embracing norms of saving money is a mode of safeguarding one from protecting someone from natural misfortunes that arises in life. Saving money is perceived as a crucial aspect of one’s future. It’s a dream for every parent to see their kids attend schools to achieve quality education. Parents opt to access credit facilities if they have insufficient funds to cater for their sibling’s education. Nevertheless, student loans may not cover all the costs (Lawless 2). Additionally, it is important to make out that education is not typically the expenses that the parents are posed to save for the future.
Keynes’ physiological theory of consumption asserts that the income is not the same as expenditure, and this creates a distinction between income and expenses. An efficient and diversified banking system is mandatory for bolstering savings and channeling them into investment. Additionally, proper banking is vital to a thriving economy (Keynes 2).
Savings not only help an individual to financial independence but also buffer him from emergency situations that demand expenses. By financial security, savings assist to reduce expenditure. It is important to comprehend that no individual can predict the possibility of losing a job or become physically disabled. In the contemporary world, an individual is bound to possess three-month worth of savings to assist during emergencies (Lawless2).
Presentation Highlighting Important facts about the Research
According to CNN, nearly 50% of the Americans are saving at most 5% of their personal incomes (Vasel). However, 25% of the total American population save at least 10% of their earnings. These classes of people were characterized by a lower credit score, and this blocked them from accessing loans. The emergency savings among the Americans was 15% of their annual income. Based on the facts, one out of a possible seven people saves 15%. Persons who are earning salaries in $50,000-$74,999 range are reported to save at least 10 %( Vasel). These individuals saved more, and this reduced the possibility of them accessing loans, and this increased the credit score. Contrariwise, persons earning, at least, $75,000 are saving more than 10% of this income. These saving habits have allowed the Americans to be financial independent and buffer emergency expense (Vasel).
A credit score defines a three-digit numeral that defines one’s financial status. A good credit rating makes it convenient to purchase assets. Credit scores can range from 300-850. Moreover, there are several factors that elucidate whether the number falls in the category. For instance, it is stated that 35% of credit score is about the payment history. Additionally, 30% is designated on the current debts. 10% is based on the new credit applications. 10% discusses the types of current credit (Burrell 35).
How credit score is affected by bad investments and good investments
In the contemporary world, investment affects the credit score of an individual in his or her life. There are several elements that are included in the credit rating. These aspects include the kinds of accounts one possess such as mortgage, car loan and credit score. It also consists of recently opened accounts and their percentages in one’s entire credit. Nonetheless, other elements contained in the credit score are the payments history, length of credit history and duration of the credit history (Burrell 35).
Poor investment decisions may expose investors to bankruptcy. Bankruptcy records are reflected in the payment history of the FICO score (Fair Isaac Corporation). Poor credit scores may hinder an individual to access loan and mortgage services. The credit score affects the price one has to pay for the credit. The lower the score, the higher the interest rate. Maintaining a habit of paying late for credits undermines the credit score. This is because the liabilities are bound to pile on the credit report. It can take nearly seven years to get a change on one’s record (Editors 114). On the other hand, when a person carries out high balances, a higher risk of default appears and this reduces the credit score.
Making good financial decisions facilitate the improvement of the credit score. Investment decisions such as allocating expenses on utility bills assist in improving the credit score. Moreover, applying decisions such as paying one’s bills on time after being late improves the FICO scores. It is important to understand that poor credit performance is not posed to result in lower credit scores. In the period that one pays the bills and credit balances in full, the history will be convincing, and this will trigger a higher score (Hawkins). Differently, a diversity of credit products is more efficient than numerous credit cards because it increases the credit score. Therefore, hitting the right balance between the forms of credit can improve the credit score. The existence of available credit information facilitates on the level of the credit score. Comparatively, the greater the score, the most probable to access the credit.
Work Cited
Burrell, Jamaine. How to Repair Your Credit Score Now: Simple No Cost Methods You Can Put to Use Today. Atlantic Publishing Company, 2007.
https://books.google.co.ke/books?id=E-qCRG4aT8YC&pg=PA46&dq=Burrell,+Jamaine.+How+to+Repair+Your+Credit+Score+Now:+Simple+No+Cost+Methods+You+Can+Put+to+Use+Today.+Atlantic+Publishing+Company,+2007.&hl=en&sa=X&redir_esc=y#v=onepage&q=Burrell%2C%20Jamaine.%20How%20to%20Repair%20Your%20Credit%20Score%20Now%3A%20Simple%20No%20Cost%20Methods%20You%20Can%20Put%20to%20Use%20Today.%20Atlantic%20Publishing%20Company%2C%202007.&f=false
Cummings, Jack. Real Estate Finance and Investment Manual. John Wiley & Sons, 2010.
https://books.google.co.ke/books?id=92UbiGPsDBcC&printsec=frontcover&dq=Cummings,+Jack.+Real+Estate+Finance+and+Investment+Manual.+John+Wiley+%26+Sons,+2010&hl=en&sa=X&redir_esc=y#v=onepage&q=Cummings%2C%20Jack.%20Real%20Estate%20Finance%20and%20Investment%20Manual.%20John%20Wiley%20%26%20Sons%2C%202010&f=false
Editors, The S. L. Credit Scores, Credit Cards: How Consumer Finance Works/how to Avoid Mistakes and Manage Your Accounts Well. Aberdeen: Silver Lake Pub, 2005. Internet resource.
https://books.google.co.ke/books?id=RaDpVzSin94C&pg=PA107&dq=How+Consumer+Finance+Works/how+to+Avoid+Mistakes+and+Manage+Your+Accounts+Well.&hl=en&sa=X&redir_esc=y#v=onepage&q=credit%20scores&f=false
Fair Isaac Corporation. "Improve Credit Score: Tips to Fix Poor Credit & Raise Your FICO Score." Get Your FICO® Scores & Credit Reports From All 3 Bureaus. Fair Isaac Corporation, n.d. Web. 22 Mar. 2016
http://www.myfico.com/crediteducation/improveyourscore.aspx
Hawkins, Ken. "The Cost And Consequences Of Bad Investment Advice." Investopedia. Investopedia, n.d. Web. 22 Mar. 2016.
http://www.investopedia.com/articles/pf/08/bad-investment-advice.asp
Keynes, John Maynard. General theory of employment, interest and money. Atlantic Publishers & Dist, 2006.
https://books.google.co.ke/books?id=xpw-96rynOcC&printsec=frontcover&dq=Keynes,+John+Maynard.+General+theory+of+employment,+interest+and+money.+Atlantic+Publishers+%26+Dist,+2006.&hl=en&sa=X&redir_esc=y#v=onepage&q&f=false
Lawless, Robert E. The Student's Guide to Financial Literacy. ABC-CLIO, 2010.
https://books.google.co.ke/books?id=htLFfJB-oKQC&pg=PA122&dq=Lawless,+Robert+E.+The+Student%27s+Guide+to+Financial+Literacy.+ABC-CLIO,+2010.&hl=en&sa=X&redir_esc=y#v=onepage&q=Lawless%2C%20Robert%20E.%20The%20Student%27s%20Guide%20to%20Financial%20Literacy.%20ABC-CLIO%2C%202010.&f=false
Vasel, Kathryn. "Nearly 1 in 5 People Aren't Saving at All - Mar. 30, 2015." CNNMoney. CNNMoney, 31 Mar. 2015. Web. 22 Mar. 2016.
http://money.cnn.com/2015/03/30/pf/income-saving-habits/
