What is Sovereign wealth funds (SWFs)?

A sovereign wealth fund is like a piggy bank that a country uses to save extra money for later.

Imagine you get an allowance every week, and sometimes you have leftover coins. You put them in your piggy bank so you can use them when you need something special, like a new toy or ice cream on a hot day. A sovereign wealth fund works the same way, but for a whole country.

When a country earns extra money (like from selling oil or gas), it doesn’t spend it all right away. Instead, it puts some of that money into its sovereign wealth fund, like saving coins in your piggy bank. This helps the country stay strong even when things get tough.

Sometimes, a country might need more money to build roads or pay for schools. The sovereign wealth fund is like having extra coins ready to use, it helps the country keep going smoothly without getting stressed.

A real-life example is Norway’s Sovereign Wealth Fund, which saves money from oil sales so Norwegians can enjoy good life even when oil prices drop.