Savings Definition According to Economics


The definition of savings according to Investopedia is “what a person has left over when the cost of his or her consumer expenditure is subtracted from the amount of disposable income earned in a given period of time”. 

Savings is also defined as a process of setting a portion of current income aside for future use. 

A balance sheet can also be examined at the beginning and end of a period to measure the increase in net worth. This is a good indicator of savings. 

It is the income received by households which is not spent nor paid to tax bodies in the form of taxation. In any household budget, there is finance that is allocated towards expenses and a portion is allocated as income. Ideally, individuals would save first before paying costs, but this isn’t always the case. With increased financial literacy it becomes easier to instil positive behaviours. Savings can remain in bank accounts for future use or can be invested in property or other options. 

A number of factors affect the rate at which money is saved at a microeconomic level. For instance, a decision to buy goods and services negatively affects savings. 

Savings can also come about because of negative expectations about future income. So if an individual is worried that they might lose their job, then they are more likely to start saving in preparation.  

Others are just in the habit of saving towards a certain goal or to establish an emergency fund. 

Savings are a great way for enabling the meeting of financial goals. They also offer a great tool for encouraging healthy behaviours.


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