We explain what savings is and what types of savings exist. Also, why it is important and what its differences are with investing.
What is savings?
Saving is the practice of set aside a portion of the monthly income of a household, organization, or individual in order to accumulate it over time and then use it for other purposes, which may be recreational expenses, important and eventual payments, or solving an economic emergency.
Savings is a common practice and also an important concept in economic theory, understood as the percentage of income or income that is not allocated to consumption. That is why there are different forms of savings and even financial instruments have been designed whose specific role is to allow or increase the desired savings.
Normally, the savings are made up of the surplus of money or resources earned during the production process whether national, business, family or personal. However, the excessive desire to save, sacrificing important or necessary expenses that could well be covered, is linked to greed and is very frowned upon culturally.
Its origins as a practice are closely linked to the origin of civilization, prior to the existence of money, which is why harvested goods were actually preserved for later consumption. The first savings and loan society arose during the 15th century as part of the new order that the Bourgeois Revolutions brought with them, and was a precursor of the current banks. Savings and capital accumulation were key in the constitution of early capitalism as an economic system.
See also: Finance
Types of savings
Normally two forms of savings are distinguished: public and private.
- Public savings It is that carried out by the State, from the income of international trade, taxes on its citizens or other economic activities. When the State saves resources it is because it has covered its basic needs for operation and assistance (public spending), and there is still a surplus or excess resources. Otherwise, we speak of deficit.
- Private savings It is carried out by private organizations of different types, that is, those that do not belong to the public sphere. Broadly speaking, it is carried out by families, non-profit institutions and companies. Said savings occur when the basic needs of the company or family are fully covered and there is a surplus of resources available.
Importance of savings
Saving is a economic planning activity vital for the survival of a productive system over time, since it entails the possibility that part of the resources produced are not consumed or wasted, but strategically safeguarded for the future.
That is why savings are encouraged at all levels, since entails a more sensible and far-sighted use of available resources that serves to face future needs or that can be invested in new projects.
What is investment?
In economic terms, investment is a form of savings and postponement of consumption, which consists of exchanging the additional resources available for goods whose value does not decrease or even increases over time, such as properties, foreign currency, business shares or various financial investment instruments, such as bank fixed terms, for example. example.
Investment logic dictates that money can be exchanged for goods that can then be sold again or that can even generate dividends, thus recovering the investment and multiplying the money saved. It is a common procedure in countries with high inflation rates or with currencies in the process of devaluation, since the goods are not affected by the loss of purchasing value that does affect money.
Likewise, it is a common way among companies and people with high purchasing power as a form of savings, since the money invested in investment goods cannot be consumed on a daily basis nor in superfluous expenses.
Continue in: Investment
