Saving

Saving is the income you do not spend or your delayed consumptions (like a new bike or a trip that you are saving up for). As your income rises, your savings tend to rise too. However, this is not always the case because if you look at the graph on page 168 of the Complete Economics for 0 Level textbook, you will see that the savings ratio (percentage of the total disposable income saved in an economy) has been going down for the past few years. This contradicts the graphs in the previous pages, where the graphs show that incomes have gone up. The amount people have saved varied drastically and went down. But again, if we remember the last post about consumption, where I spoke about how if consumer confidence rose, consumption would rise too, then this behaviour is explained.

Why do people save?

Interest rates

If having a savings account is really worth it, then lots of people will do it. Banks right now do not offer such good interest rates as they did before (it is very difficult to get even just a 1% interest rate on a savings account). This is one of the many factors that have driven the savings ratio down.

Consumer confidence

The way people feel about their current job and position in the future will make them save more or less. If they see a good future in their workplace, they will not save as much as if they think that they might lose their job in a few months.

Availability of saving schemes

If there are lots of ways to save money, then more people will be tempted to do it. That is why banks offer a wide variety of solutions with different terms and conditions to suit different people.