Saving

Saving is income not spent, or deferred consumption.save-300x300

Factors affecting savings

  • Interest rates: Higher interest rates will encourage people to save more.
  • Availability of appropriate savings schemes: With more options to save money people will be attracted to save more
  • Advertising of/knowledge about what is available at financial institutions
  • Confidence/trust in financial institutions
  • Size of real disposable income: Disposable income is the income left after paying taxes. Thus more money left in pockets will encourage people to save more.
  • Rate of inflation: when inflation is high people have less money left with them to save because a major part of their disposable income will be spent to satisfy their needs and wants.
  • Save for a future purchase: People might save with the motive to carry out a future purchase e.g. a house
  • Precautionary factors: People might be ‘saving for a rainy day’
  • Tastes and preferences of consumers: It also depends on a individuals preference. Some people save more than others.
  • Consumer confidence/expectations about future changes in the economy, e.g. risk of unemployment may lead to people saving more