to save

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To reserve part of the money that one has. saving is defined as the difference between available earnings (or available income) and consumption

Savings = available earnings - consumption

Saving can also be classified in two different ways:

- Private savings: those that are made by individuals or private organisations not belonging to the government.

- Public savings: those that are made by the government. Public savings means that the government income is higher than government expenditures which, at the end of a period, would lead to a fiscal surplus.

If the opposite takes place (greater expenditures than income), a fiscal deficit would occur. Public savings are affected by the public economic and political policies that a government puts into place. An example of this is the interest rate, in some cases.

Given the changing value of money, saving can have certain disadvantages since those available earnings not spent over time can lose value. The main causes of this are inflation, commissions or fees on savings and, in economics, the opportunity cost derived from investing those savings in something more profitable (although this can mean taking on a certain level of risk.


Public and private saving explained

Public and private saving explained