Concept of Saving

The Income Not Spent On Consumption Is Defined As Saving. Saving Is The Act Of Not Consuming All Of One’s Current Income Whatever Is Not Consumed Out Of Disposable Income Is By Definition Saving It Is A Withdrawal From The Circular Flow Of Income The Economys Saving Equation Is Saving = Disposable Income – Consumption There Are Several Motives Which Induce- People To Save They Can Be Grouped Under Two Headings (I) Power To Save (Ii) Will To Save
(1) Power To Save: Power To Save Depends Upon The Level Of Income Which A Person Earns In Case Of A Nation Power To Save Depends On Proper Utilization Of Natural
Resburces It Is Because When The Income Is Low Then Almost The Whole Amount Is Spent On Meeting The Bare Necessities Of Life So Saving Is Very Nominal But In Case Of High Income One Can Save If He Likes Because He Has Got The Surplus Income Over Consumption.
(2) Will to save: The Willingness To Save Is Influenced By Subjective Considerations.
Subjective Considerations:
Foresight: People Save Money As A Provision Against Some Unforeseen Circumstances Which Might Arise In The Future A Few Other Accumulate Wealth For Their Dependants All These Prudential Considerations Can Be Constituted Under The Heading Foresight
(ii)  Social and political considerations: Wealth Gives Power Over Other Men In The Economic Sphere And Also Political And Social Influence The Desire Of Prestige, Power And Respect In Social Sphere And Political Life Actuates Human Being To Save
(iii)     Temperamental considerations: There Are A Few Persons Who Save Neither For Their Families Nor For Their Own Use But Merely Because They Have Acquired A Sort Of Mania For Accumulation Of Wealth For Its Own Sake.
Objective Considerations:
(i)  Security of Life and Property: If There Is Security Of Life And Property In A Country The Saving Is Encouraged.
(ii) Facilities for Investment: If Facilities Of Profitable Investment Are Available Then Saving Is Stimulated.
(iii) Monetary Stability: Monetary Stability Also Plays A Very Important Part In Inducing The People To Save Money If People Apprehended A Sharp Fall In The Value Of Money Then Saving Is Discouraged And If The Value Of Money Is Expected To Rise The Saving Is Encouraged.
(vi) Saving and the Rate of. Interest: It Is One Of The Very Important Factors Which Exercises Influence On The Volume Of Saving If The Rate Of Interest Is High It Generally Induces People To Save More Money And If It Is Low The Saving Is Discouraged However There Will Of Course Be A Few People Who Will Try To Save More Even When The Interest Rate Is Low Or Save Jess When The Interest Rate Is High Just To Provide For Themselves A Certain Annual Income For Their Old Age Or For Their dependants, . For • example, a man wishes to have an annual income of Rs. 2,000 after retirement If, we suppose the annual rate of interest is 10%, then he has to save Rs. 20,000, to get an income of Rs. 2,000. If the rate of interest falls down to 5%, then he has t6 save Rs, 40,000 to get the desired sum of Rs. 2,000. There will of course be many people who will go on saving whatever the rate of interest On the whole what we can say is that saving is encouraged when the interest rate is high and discouraged when it is low.