Means of accumulation: their types. Money as a store of value

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:41

When a certain threshold of earnings is reached, a person always begins to think about saving. Both modern man and a man of an earlier culture will think about how to preserve the existing we alth and increase it. For all the time of its development, examples of means of accumulation have changed and been modified. At the moment, money is the most famous and popular means of savings. However, not the only one.

Definition

According to the definition, such funds include something that has the equivalence of the value of a good or service and is stored for later exchange.

In the definition, money is not assigned the role of the only means for saving values, since a lot of other things that are not directly related to money can have the same properties. Such freedom in choice allows a person to find his own way to accumulate and increase his financialstatus.

The process of accumulation

The accumulation itself is not as simple as it might seem at first glance. In addition to the usual process of holding a certain amount of funds for exchange, there are also the following accumulation methods:

• Through banking services such as deposits.
• Investment savings.
• Savings in the form of certain material goods or luxury goods.

However, money as a means of accumulation still plays a major role in modern economic relations. Since they are the equivalent of the cost of almost any product or service, they are highly liquid, and also quite versatile, they are easy to move from the buyer to the seller. But in addition to money, there are alternative options on the market for saving we alth.

Savings methods and their types

Since a lot of values fall under the definition of means of accumulation, let's consider the main and most recognized by people:

• For investment accumulation, specialized investment vehicles are most suitable: stocks, bonds, and real estate. Since investments are long-term investments of one's we alth in something with subsequent receipt of income from an investment project, the main selection criterion for a person who decides to invest is income. That is, periodically the investor receives cash or other payments from the accumulation funds that he has invested. Such projects are called assets.
• Savingsfunds in luxury goods or antiques is not an investment in the strict sense, since the thing does not generate income in the process of storing it with a person. The savings methodology is thus designed for the subsequent increase in the cost of antique or expensive goods.
• Banking services offer savings programs such as deposits or savings. Separately, it is necessary to stipulate that deposits and deposits are precisely savings programs, but in no way earnings. Earnings on bank deposits is a myth, since the interest rate allows you to protect funds from inflation (depreciation), but not to increase them. Each banking organization has its own conditions for providing deposits, but the mechanics of this accumulation method is the same: the client issues his funds to the bank for a certain period, and during this time the bank undertakes to pay the client a predetermined percentage.

Of course, the given examples of means of accumulation are far from being the only ones. However, at the moment they are the most popular and well-known.

Conditions for fulfillment

First of all, a potential store of value must have liquidity, that is, the ability to be equivalent to the cost of the maximum number of goods or services. In addition, it must be mobile so that there are no obstacles to exchange during the process itself. It must also fit the form of accumulation chosen by the person.

Money and its versatility

Money is perhaps the mostknown and popular store of value since its inception. They were created solely as a measure of value, and without them at the moment it is difficult to imagine the economy as such. The value of each commodity is expressed in a certain amount of money that the buyer must pay for the purchase of this commodity. And the simplicity of the exchange process makes them incredibly convenient. Therefore, they are the first thing that comes to mind as an exemplary store of value.

In what cases does money cease to fulfill this function

The process of buying itself, that is, their exchange for goods or services, directly depends on both the cost of the goods and the cost of the banknotes themselves. The latter property (called liquidity) can in some cases become an obstacle to the exchange of money for goods or services. Therefore, in order to maintain the status of a store of value for specific money, it is necessary to maintain their liquidity at a high level. Their value on the market may decrease or increase depending on internal or external factors affecting the country with the circulation of certain banknotes.

Each country strives to keep its currency as stable as possible, for which you need to keep a balance between demand for it and supply on the market. An excess of money supply causes a process called inflation, that is, the depreciation of money. With high inflation, money loses its function as a store of value, as it cannot be stored for a long time due to the decrease in its value over time. Therefore, the fight against inflation is a key waysave them the opportunity to accumulate with their help.