1 / 16

Savings

Savings. Factors that Affect Household Saving in the UK. Saving. Saving is “deferred spending” A preference to consume tomorrow rather than today Saving is not investment! But savings flow into the financial system ……… ………and help to provide the funds for investment spending by firms.

harrison-mcintyre
Télécharger la présentation

Savings

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Savings Factors that Affect Household Saving in the UK

  2. Saving • Saving is “deferred spending” • A preference to consume tomorrow rather than today • Saving is not investment! • But savings flow into the financial system ……… • ………and help to provide the funds for investment spending by firms

  3. Savings Options Cash Hoarding Bank Accounts Building Societies ISA’s Private Pensions Equities

  4. Introduction • Around 46% of UK households engage in ‘active’ saving (e.g. into a savings account or contributions to a personal pension scheme • Average amount of monthly saving for those households that save is £180; across all households (savers and non-savers), the average is £83

  5. Introduction • The household savings ratio is measured as the percentage of real disposable income that is saved rather than spent

  6. Introduction • The savings ratio is income minus expenditure expressed as a proportion of total income • (S = Yd – C) / Yd • Where Yd = Disposable Income (i.e. income after tax and benefits) • The savings ratio has been quite volatile in recent years

  7. Motivations for Saving • Precautionary saving • Fear of unemployment e.g. during a slowdown or a recession

  8. Motivations for Saving • Building up potential “future” spending power • Finance for major items of spending – such as a new car, tuition fees, school fees or a family wedding • Deposits for mortgages • Saving to pay university tuition charges and school fees!

  9. Motivations for Saving • Incentives to save from higher/rising interest rates • A desire to leave bequests to future generations

  10. UK Household Savings Ratio

  11. Savings and unemployment

  12. Trends in the Savings Ratio (1) • The savings ratio is the percentage of disposable income that is saved rather than spent • Savings provide a financial safety net for households • A fall in the savings ratio means that households are choosing spending today rather than tomorrow • This may be accompanied by a build up of consumer debt which will have to be repaid at some point in the future

  13. Trends in the Savings Ratio (2) • Recent fall in the savings ratio has coincided with a period of high spending by consumers • In the long run households must judge what is an appropriate level of saving to maintain their living standards • The danger of a sustained fall in saving that people are borrowing too much and running into the risk of becoming over-geared (i.e. they have too much debt)

  14. Trends in the Savings Ratio (3) • A fall in house prices, a rise in unemployment or a rise in interest rates might catch out millions of people who have borrowed heavily on their credit cards • If the savings ratio increases sharply, the total level of consumer spending may fall in the short term • This will have a direct effect on demand and incomes in the circular flow for the economy

  15. Income and spending

  16. Borrowing and debt • Borrowing money is effectively dis-saving • This is because it allows people to consume in excess of their current incomes • Borrowing must eventually be repaid • Consumer borrowing has been strong in the UK • The debt mountain for consumers is over £1 trillion

More Related