Savings Behavior and Influencing Factors

Saving is normally considered in economics as disposable income minus personal consumption expenditure. In other words, it is regarded as income that is not consumed by immediately buying goods and services. The above definition is clear that saving is closely related to investment. By not using income to buy consumer goods and service, it is most likely for a resource to instead be invested by being used to produce tangible and intangible capital such as machinery, schooling, and on-the-job training, among others. Saving can therefore be vital to increasing the amount of capital available. First of all, what kind of factors is affecting savings? To this question can be several answers. 1) Interest rates: Higher interest rates will encourage people to save more, because people have to consider more carefully- take credits with high interest rates or not, and therefore more often people decide not to take credit, choosing to spend less money. And at the end of this, economics development is not encouraged. 2) Confidence, trust: usually people don’t have trust to financial institution; therefore people choose to save money.