Average propensity to save
What is average propensity to save?
This is the proportion of income that a household puts into savings. It's sometimes called the savings ratio, and is expressed as a percentage of a household's total disposable income.
Where have you heard about average propensity to save?
It's sometimes used in discussions about economic health, because when consumers are saving this can have a negative effect on the economy. Less spending on goods and services can lead to lower demand and more business closures, which can create unemployment.
What you need to know about average propensity to save.
It can be affected by many different factors, including the rate of inflation. When prices are expected to rise, people may be more likely to spend now and save later. The average propensity to save is also affected by the number of older people living in a particular area. People who are older may have less motivation to save, and some may not be able to save much if they wanted to.