Importantance Saving

Savings play a significant role in any economy. Savings are done by three 'entities' in the economy: households, companies and government.

Households save mainly due to two reasons: To cover up upcoming expenses like buying big ticket durable goods, children's education, and for retirement.

Company savings are just that element of their earnings that they do not disburse out to shareholders as dividends but keep hold of it to finance future investment in the business.

Government saves when its tax revenues surpass its expenditures on chronic items (such as social security payments, wages, fuel, schoolbooks, medical supplies for hospitals, etc). If its tax revenues exceed these current expenses, it has money left to spend on the building of new roads, bridges, hospitals, schools, etc.

If households not succeed to save adequately to cover up future expenses, the result is very simple: they will not have adequate resources to cover premeditated future big expenses and/or they will struggle economically during retirement. They will ultimately become dependent on others or the government to supply social services that will affect the government's ability to spend money on social and physical infrastructure (ports, roads, schools, bridges, hospitals, etc).

Government can cover the additional social expenditure, by imposing the additional taxes on public but this will further limit households' ability to save and spend, and, if the additional tax burden falls on companies, it will reduce their profitability and limit their ability and willingness to invest If government does not save, it means it will have no money accessible for fixed investment in social.