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What Are The Importance Of Savings And Investment For Economic Growth?

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Jackie Russell Profile
Jackie Russell answered
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.
Raj Mehta Profile
Raj Mehta answered

The investment and savings have positive role to play in the economic growth of country as well as individual. The investments boost the growth by multiplying the wealth and increasing disposable income. The savings act as safety net to get immediate finance in case of emergency. ICICI Prudential AMC has various savings and investment plans for the clients.

Karl Sagan Profile
Karl Sagan answered

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Chips Ters Profile
Chips Ters answered

Talking about the financial market, there’s need for knowledge which is why it is advisable to seek the help of a Financial Coach/Advisor to help in what stock or shares is best to invest in and also when to sell to make maximum profits.

I’ll advise you get a good financial planner/broker and invest accordingly.

I suggest you contact an investment advisor from this news for this amount of money. You want a diversified portfolio that also meets your liquidity needs. Putting it all into stocks or all into indices that track the same market would be overly conservative in my opinion. Diversify across investment types (stocks, bonds, other) and industries. With over $5k to $10k or more you are part of a good accredited investor and have higher return options available than the non-accredited investor.

Anonymous Profile
Anonymous answered
The savings is a potential source of investment. Investment within the economy leads to growth. For eg: Investment in infrastructure would lead to better facilities which will be an attraction for FDI or investement in education will mean more educated people enter the workforce which take the economy to next level of growth.

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