Chapter 6, Problem 20AA

To determine

To analyze: The long-terms goals of savings.

Explanation of Solution

Savings can be defines as the amount of income left after consuming commodities and services. Savings are used to fulfill the short-term and long-run goals.

Long-term goals are something that an individual wants to do in the future. The long-term saving goals can include savings done for the purchase of a car or house which requires a huge sum of money in the future. It may include savings done for the time of emergencies like job loss or medical bills. Sometimes long-term savings are done to fulfill the basic requirements at the time of retirement.

Long-term savings goals to purchase a house or saving for retirement and college can be done in several ways:

1. Deposit money in the bank for a longer time period in a fixed deposit which will pay a higher interest rate as compared to the standard interest rate.
2. By investing in long-term bonds which will pay a good return in the future.
3. By buying stocks or shares in a company that will help the person to earn more returns in the future.