1.

The Importance of Savings

Savings is the portion of income not spent on current expenditures. Because a
person does not know what will happen in the future, money should be saved to pay for
unexpected events or emergencies. An individual’s car may breakdown, their
dishwasher could begin to leak, or a medical emergency could happen. Without
savings, unexpected events can become large financial burdens. Therefore, savings
help an individual or family become financially secure. Money can also be saved to
purchase expensive items that are too costly to buy with monthly income. Buying a new
phone, purchasing an automobile, or paying for a vacation can all be accomplished by
saving a portion of income.

2. Types of Savings Bank

Savings bank, financial institution that gathers savings, paying interest or
dividends to savers. It channels the savings of individuals who wish to consume less
than their incomes to borrowers who wish to spend more. This function is served by the
savings deposit departments of commercial banks, mutual savings banks or trustee
savings banks (banks without capital stock whose earnings accruesolely to the savers),
savings and loan associations, credit unions, postal savings systems, and municipal
savings banks. Except for the commercial banks, these institutions do not accept
demand deposits. Postal savings systems and many other European savings
institutions enjoy a government guarantee; savings are invested mainly in government
securities and other securities guaranteed by the government.

3. Specify or give the Capital Accounts Requirement.

The prerequisite amount of Funds that depository institutions and banks must have
on hand to meet liquidity levels on certain assets required by regulatory agencies such
as the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board and
the bank for International Settlements. According to the FDIC, an
adequately funded institution must have a Tier 1 capital-to-risk weighted asset ratio of
a minimumof 4 percent. also called regulatory capital.