Determinants of (factors influencing) the Level of savings in the Economy
- Rate of interest on bank deposits. The higher the interest rate, the higher the level of savings and the lower the interest rate, the lower the savings.
- The level of income. The higher the level of income, the higher the level of savings and vice versa.
- The rate of inflation. The higher the rate of inflation, the lower the level of savings. This is because with a general increase in the price level, the real money value reduces hence discouraging people from saving their money in cash form.
- Age of an individual. People tend to save and dissave at different times of their life cycle. Young people tend to save less while relatively older people tend to save for their retirement at old age.
- Degree of occurrence of unforeseen circumstances. Most people put some money aside, if they can, when they expect things like wife’s delivery, sickness, unemployment etc.
- Habits and customs. Some people and societies have a higher saving culture than others for example members belonging to a saving association are more likely to save than those ones who do not belong to any saving association.
- Health status of the person. Ill health discourages savings. This is because it sickly person who is expecting death in the near future will only consume all that he/she has instead of saving.
CATEGORIES Economics
TAGS Dr. Bbosa Science
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