The relationship between savings, investments and economic growth can be very complex in nature which requires stripping back to its simplest form.
Savings in this function acts basically as a low interest capital source for economic growth. Investments are the bridge for this capital between savings and growth.
Firstly, savings must be accessible. If they are not deposited in financial institutions or are tied up in bonds or account structures that limit access to them, these savings cannot assist economic growth in any real way as they cannot be channelled into investment opportunities. Saving should thus be encouraged in order for the funds to be directed to investment.
Having large resources in savings can provide more capital than itself as it can be used as collateral or security for loans, providing more funds for investment and potential business ventures and therefore economic growth
Having plenty of money saved will also allow for more gambles to be made, exploring sleeping talents and opening up previously unforeseen revenue streams. These large resources will act as protection for when problems arise.
Theoretically, when savings are high, investments increase and the economy grows. But the business unto which the investment will be injected must provide the potential for better returns than leaving the money in the safety of the bank.
But if we do not make investments then the economy will not grow and this will eventually affect interest rates. A capitalist society is built on the foundations of perpetuating economic growth and it continues to grow with investments either from our savings or the investments of foreign capital. If the latter occurs then most of the wealth crated will eventually drain out of the country but it will provide jobs and that can drive economic growth in other sectors.
Savings in this function acts basically as a low interest capital source for economic growth. Investments are the bridge for this capital between savings and growth.
Firstly, savings must be accessible. If they are not deposited in financial institutions or are tied up in bonds or account structures that limit access to them, these savings cannot assist economic growth in any real way as they cannot be channelled into investment opportunities. Saving should thus be encouraged in order for the funds to be directed to investment.
Having large resources in savings can provide more capital than itself as it can be used as collateral or security for loans, providing more funds for investment and potential business ventures and therefore economic growth
Having plenty of money saved will also allow for more gambles to be made, exploring sleeping talents and opening up previously unforeseen revenue streams. These large resources will act as protection for when problems arise.
Theoretically, when savings are high, investments increase and the economy grows. But the business unto which the investment will be injected must provide the potential for better returns than leaving the money in the safety of the bank.
But if we do not make investments then the economy will not grow and this will eventually affect interest rates. A capitalist society is built on the foundations of perpetuating economic growth and it continues to grow with investments either from our savings or the investments of foreign capital. If the latter occurs then most of the wealth crated will eventually drain out of the country but it will provide jobs and that can drive economic growth in other sectors.
