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savingthe proportion of a person's (personal saving), company's or institution's (retained profits) income that is not spent on current consumption. Savings are typically placed on deposit with a BANK, BUILDING SOCIETY, etc., or used to acquire financial and physical assets such as SHARES or plant. By forgoing immediate spending on consumption, savers seek to augment their future income through dividends, interest and rent receipts and through capital appreciation.
In the simple circular flow model, all saving is undertaken by households; in the extended model, saving is also undertaken by businesses (retained profits) and the government (budget surplus).
In real terms, saving is important in that it ‘finances’ physical INVESTMENT. Saving (forgoing current consumption) releases resources that can be devoted to increasing the country's CAPITAL STOCK and hence its capacity to produce a greater quantity of goods over time. See also SAVINGS SCHEDULE, PARADOX OF THRIFT, INDIVIDUAL SAVINGS ACCOUNT (ISA), PREMIUM BOND.