Concept of Consumption and Saving

Topics: Macroeconomics, Economics, Investment Pages: 3 (968 words) Published: September 17, 2010

Consumption and savings are opposite by nature. The term consumption denotes expenditure and by savings we understand the act of preserving money for the future needs. Most of us are in the habit of meeting the present needs from our income. After that, if there remains anything, then only savings can be done. But in the long run, it is the savings that matters most. 

The concept of saving is important in the context of economics and finance. In general application, saving usually stands for depositing money separately for a particular purpose, for instance investment in retirement plan or depositing cash in the bank. In other words, savings means the reducing of expenditure and the act to avoid wastage. According to personal finance concept, saving means keeping or conserving money to be used in the future. Whereby usually the money is deposited, instead of investing it, where a risk factor is always involved. Saving is done with some pre-determined investment objectives. In other words, saving is the act of conserving cash for any purpose or for future usage. On the other hand, savings means the cash saved to that very moment. Examples of saving are: 1) Mr. Lim has been saving 20% of his earnings just because he is aiming to increase his savings so that it would be enough to purchase a car. 2) Miss Camille has been saving 35% of her earnings just because she wants to get her fiancée a nice wallet for his birthday. Examples of savings are:

1) Mr. Jamal saved RM2100 to buy new clothes for his newly born son. 2) Patrick has RM 50,000 in his savings account.

Of late, the terms saving and investment has been have been contradicting. Although both saving and investment are means of achieving financial security for the present as well as the future, they are not actually the same thing. The big difference between savings and investment is the present of the risk factor. In savings, the risk...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Saving on Fuel Consumption Essay
  • Essay on Consumption
  • National Savings Essay
  • Savings Essay
  • Principle of Energy Saving and Design Concept Research Paper
  • Saving Habit Essay
  • Brazil Consumption Essay
  • Macroeconomics and Savings Research Paper

Become a StudyMode Member

Sign Up - It's Free