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What are savings?

Savings

Savings represent funds available to spend now but instead put aside for future use. In economics jargon, savings represent 'deferred consumption'. In modern societies, savings usually attract a rate of interest, which is ultimately paid by those who have borrowed the money, usually from the bank in which the savings are stored.

Where have you heard about savings?

Almost from birth you are likely to have been told that the 'savings habit' is a good one to develop and reminded constantly to put aside something 'for a rainy day'. In later life, advertisements and other promotional material will tempt you with 'market beating' rates on interest on your savings.

What you need to know about savings.

Savings are the ultimate bedrock of any economy. Without savings, there would be no credit and no investment. Money kept in piggy banks or under the mattress count as savings, but in contemporary economies savers are usually rewarded for their thrift with payments of interest on their deposits. Such payments are made possible by the interest charged on the loans made with those deposits. While some level of saving is desirable, so is some level of spending - should everyone try to save at the same time, the economy would grind to a halt.

Find out more about saving.

Saving is a vital part of the economy but it cannot support activity on its own. To learn more, see our definition of debt.

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