Question

Explain clearly the factors which affect the creation of saving in country.

Answer 1

Factor affecting the creation of saving in country.

• Interest rates: Higher interest rates will encourage people to save more.
• Availability of appropriate savings schemes: With more options to save money people will be attracted to save more
• Advertising of/knowledge about what is available at financial institutions
• Confidence/trust in financial institutions
• Size of real disposable income: Disposable income is the income left after paying taxes. Thus more money left in pockets will encourage people to save more.
• Rate of inflation: when inflation is high people have less money left with them to save because a major part of their disposable income will be spent to satisfy their needs and wants.
• Save for a future purchase: People might save with the motive to carry out a future purchase e.g. a house
• Precautionary factors: People might be ‘saving for a rainy day’
• Tastes and preferences of consumers: It also depends on a individuals preference. Some people save more than others.
• Consumer confidence/expectations about future changes in the economy, e.g. risk of unemployment may lead to people saving more