Saving
Saving is income not spent, or deferred consumption.
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
