Even small savings yield significant returns
Assoc. Prof. Dr. Asil Azimli: “Even small savings yield significant returns”
Assoc. Prof. Dr. Asil Azimli, lecturer in the Faculty of Economics and Administrative Sciences of Cyprus International University (CIU) stated that savings which are significant in economic growth have gained many advantages and noted that savings are the cheapest and most reliable source of finance for an economy, that accelerate the economic recovery after a crisis and reduce workforce losses.
Dr. Azimli also pointed out that saving provides companies with the financing they need, and said, “Savings support investments, trigger economic growth and suppress financing costs as savings increase the current supply chain finance market.”
Assoc. Prof. Dr. Azimli reminded that the main motivation for people to resort to saving relies on their belief that they will be able to consume more in the future. Azimli said, "In other words, saving is postponing your current consumption for a higher purchasing power in the future."
Azimli said that in this context, people tend to save in economies with a higher return opportunity (real income) than the inflation rate, and that the opposite is the case in countries with a return below the inflation rate, and that the concern that prices will increase triggers today's consumption, and thus reduces savings.
Assoc. Prof. Dr. Azimli pointed out that a significant part of the society is experiencing financial difficulties in today's economic conditions, but even under these conditions saving is very important. Azimli also said, “Let me explain with an example what the consequences of saving even small amounts can be. Suppose we deposit 100 units of money each month into a savings account for 20 years in an economy where the average annual real rate of return is 6% (ie, the real monthly interest to be earned is 0.5%). At the end of this savings period, the money will add up to 86,204.1 units. However, if we keep this total amount under the pillow, the amount will reach only 24,000 units at the end of 20 years.”
Azimli said that the amount of savings is not important, even a small amount should be considered as savings. "It will be beneficial for you to invest a certain part of your income every month that suits your risk preference."