Saving money can be considered from the point of view of the formation of financial independence of an individual individual and as one of the factors providing a reserve for the financial solvency of the state.
Savings as an indicator of a person's wealth
Wealth is an economic concept that characterizes the financial condition of a person's security. Financial solvency is due to the fact that an individual can make all the necessary payments and has a sufficient amount of funds for this. Solvency is also defined as the ability of a person at any time to fully fulfill their financial obligations to government and financial institutions. These liabilities include, for example, credit and tax payments.
Savings are the accumulated (saved) amount of funds that are not involved in making regular payments and in the money turnover of an individual. Savings are determined by the difference between a person's actual income and the amount of his consumption expenditures. The funds saved are most often an incremental value and form a financial asset.
The population resorts to accumulating savings for the following purposes:
- planning in the future the purchase of an expensive product or service (car, real estate, travel package, etc.);
- formation of its own retirement and medical reserve;
- providing funds for a future important life event (wedding, moving);
- making a profit from deposits.
Savings can also be used to incorporate them into circulation and generate profits. They are used to buy securities of other stock market instruments.
Savings as an indicator of the viability of society and the state
Cash savings are a special economic phenomenon because are an indicator of the standard of living of the population. They demonstrate financial stability and the ability of people to maintain their long-term wealth.
From the point of view of the economy of the state, the amount of savings of the population can be considered as a resource for economic development and one of the factors providing for the economic well-being of the state. Savings can be invested in the cash flow of enterprises, thus creating additional incentives for development. Participating in the money turnover of financial institutions, savings act as a source of funds for lending to economic entities, which is a support for small and medium-sized businesses. Savings can also be a source of investment in new business ideas.
