What saving means:
Consumers have the choice of either consuming (spending) or saving their income. If you choose to save more, then you have less to spend. If you spend more, then you have less to save.
Saving means giving up current consumption to have more money in the future for consumption.
Benefits of Saving
There are five benefits or reasons to save:
- Future needs and wants: saving now increases your ability to spend money on needs and wants in the future.
- Safety: money in a bank account cannot be lost or stolen.
- Security: You have the security of knowing that should something go wrong there is money set aside.
- Special purpose: the most obvious reason why people save is for a special purpose. For example, saving to buy a car.
- Interest: many people save so that they can earn an income. Money saved in a bank earns interest.
