Many people are hoarding in one way or another. So, some people save their working days so that later they get a big he alth vacation, others collect things, and then they take everything that has accumulated safely to the country, and still others prefer to accumulate money. In the article, we will take a closer look at the last hobby, which is called the “accumulation of funds” in the literary language.
Definition of concept
What is accumulation in general? Translated from Latin, this word means "accumulation". In our case, we are talking about the financial side of the issue, and, therefore, the accumulation of funds implies the accumulation of one's own or externally attracted funds in order to benefit by providing these financial assets to a person in need at a certain percentage.
In simple terms, the accumulation of cash is a good way to increase capital. From the outside everything seemsquite simple, but in our time there is a problem of uniting persons who own free funds in the required amount and people who need them.
Accumulation functions
The accumulation of funds is an important phenomenon in the economy of any state. Among the main functions that are performed by this process, the following should be indicated:
Redistribution of financial assets, support for businessmen and entrepreneurs. Thus, representatives of medium and small businesses, as well as individual entrepreneurs, often become bank borrowers. There are situations when initiative people have great ideas and promising projects are developed, but there is no finance for their implementation in practice. Here, the accumulated funds come to the rescue, which are concentrated in the same hands and can be directed to those people who know how to make money not just lie in the bank, but work
- Saving precious time looking for borrowed money. Instead of entering into loan agreements with several holders of free funds, it is enough to apply to one.
- Getting a good profit. As you know, the accumulation of funds is beneficial both for those who accumulate money and for those who contribute their free funds and receive a previously agreed percentage for this. According to many financiers, assets should not be "dead" capital, but, on the contrary, always rotate in cash flows, since inflation manifests itself constantly andcan cause depreciation of "stale" cash in the chest of drawers.
Examples of fundraising
Often, ordinary citizens and owners of small or medium-sized businesses have situations when a large amount is urgently needed, but there is none on hand. In this case, a citizen can apply to several borrowers and collect the necessary amount of money (for example, to buy a home or a car). The citizen will have to continue to pay interest within the agreed time frame to each of the borrowers. This, of course, is inconvenient and takes a lot of time. And if one of the borrowers pooled their free funds and others' funds and borrowed them for a needy citizen, then this would already be an accumulation of citizens' funds. The Bank today in the financial world plays a leading role in terms of the concentration of their own and other people's money and their subsequent use. Therefore, most of the population now prefers to apply for a loan to a banking organization rather than to a private person.
Bank accumulation
In modern society, the most prominent representative, which is characterized by the accumulation of funds, is credit and commercial structures, in particular, banks. It is they who are engaged in the fact that they concentrate the free money of the population with the aim of their further redistribution and profit.
Few people know, but earlier banks used exclusively their own free funds. However, over time, the popularity of these organizations has grown significantly, and they began to borrow money from citizens. Thus, various types of deposits appeared. Why do banks need such deposits? The accumulation of funds by the bank is done in order to attract free financial resources of the population and their redistribution for a higher percentage. The whole point is that a person takes his funds to the bank and borrows a certain amount for him at interest (the corresponding interest on the deposit). The bank, having received this money, lends it to needy people at an even higher percentage, that is, it provides a loan.
According to statistics, today banks have about 20 percent of their own funds in their arsenal, while borrowed funds account for 80%. This information confirms the fact that a banking organization is a kind of intermediary between people who own free money and people who need it.
Methods of bank accumulation
One of the most common ways to attract free funds from the population and non-profit organizations are deposits. In order to attract as much money as possible, banking structures use such forms of savings as bonus, pension, youth, winning, etc. In some countries, in addition to the interest received from the deposit, additional services are provided to the population (free postal orders, telegraph, trade services, etc.). For example, in the United States, savings deposits of the population occupy the first place among term deposits.
Peculiarities of banking activities
The work of a banking organization to accumulate funds has a number of features:
- the bank directs the accumulated funds to solve other people's problems (needs);
- accumulated funds by right of ownership still belong to the one who brought them to the bank;
- activities involving the accumulation and redistribution of funds must be confirmed on paper - licenses;
- own free funds make up only a small part of the total capital of the bank;
- accumulation of free cash is the most important function of a financial institution.
Pluses of accumulation
Let's consider how good savings are for citizens and the state as a whole. The accumulation of citizens' funds allows the holders of free money themselves to profit from them. In addition, accumulation helps to develop small and medium-sized businesses in the country, replenish the state treasury, and at the same time improve the standard of living of the population. As for the replenishment of the state budget, state banks play an important role here, which act as guarantors of saving citizens' deposits. Often people, choosing between private commercial organizations and state ones, opt for the latter, since the level of trust here is much higher. Commercial structures, in turn, attract the population with higher interest rates on deposits and lower interest rates on loans.
