What is saving?

We explain what savings are and what types of savings exist. In addition, why it is important and what are its differences with the investment.

  1. What is saving?

Saving is the practice of separating a portion of the monthly income of a home, an organization or an individual , in order to accumulate it over time and then allocate it to other purposes, which may be recreational expenses, significant payments and eventual payments. , or solve an economic emergency.

Saving is a usual practice and also an important concept in economic theory, understood as the percentage of income or income that is not destined for 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, savings are made up of the surplus of money or resources accrued during the production process , whether national, business, family or personal. However, the excessive desire for savings, sacrificing significant or necessary expenses that could well be covered, are linked to greed and are very badly viewed culturally.

Its origins as a practice are closely linked to the origin of civilization, prior to the existence of money, so that harvest goods were actually preserved for later consumption. The first savings and loan company emerged during the fifteenth century , as part of the new order brought by the Bourgeois Revolutions, and was a precursor to the current banks. Saving and capital accumulation was key in the constitution of early capitalism as an economic system.

  1. Types of savings

Normally, two forms of savings are distinguished: public and private.

  • The public savings . It is the one that performs the State , from the income of international trade, taxes to 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 of resources. Otherwise, talk about deficit .
  • The private savings . It is the one carried out by private organizations of different types, that is, those that do not belong to the public sphere. Broadly speaking, it is done by families , nonprofit institutions and businesses . Saving is given when the basic needs of the company or family are fully covered and there is a surplus of available resources.
  1. Importance of saving

Saving encourages a more sensible use of available resources.

Saving is a vital economic planning activity for the survival of a productive system over time, since it entails the possibility that part of the resources produced will not be consumed or wasted, but strategically safeguarded for the future.

That is why saving is encouraged at all levels, since it involves a more sensible and proactive use of the available resources , which serves to meet future needs or that can be invested in new projects.

  1. What is the investment?

In economic terms, investment is a form of saving and postponement of consumption, which consists in changing the additional resources available for goods whose value does not decrease or even increase over time, such as property, foreign currency, business shares or various instruments financial investment, such as bank fixed terms, for example.

The logic of the investment dictates that money can be exchanged for goods that can then be re-sold , or that can even generate dividends, thus recovering the investment and multiplying the money saved. It is a usual procedure in countries with high inflation rates or with currencies in the process of devaluation, since goods are not affected by the loss of purchasing value that does affect money.

Likewise, it is a common form among companies and people with high purchasing power as a form of savings, since the money invested in investment goods cannot be consumed daily or in superfluous expenses.

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