Tuesday 6 December 2016

Young and old dealing with debt differently but it remains economy's biggest problem

Published 22/04/2014 | 02:30

Saving has always been important for the economy as a whole
Saving has always been important for the economy as a whole

I remember being introduced to saving through a large plastic hippo and some stickers in the era of SodaStreams,Transformers and ThunderCats. This plastic hippo was a money box, and like thousands of others, I saved for the fun of it. Saving even became a fad in my circle of friends. It faded, as all fads do, and now I'm trying to get my own children to save and searching for the modern equivalent of that plastic hippo. Time flies, but saving has always been important for the economy as a whole.

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Saving is the pool from which productive investments are drawn, where pensions get paid from, and where the difference between what households consume and their disposable incomes get stored. Households pay their debts down out of savings.

At the level of the economy, when saving is too low, it means investable capital either has to come from abroad – which is pretty risky – or it means excellent projects just won't get funded, which hampers growth. If saving rates are too high, then not enough consumption takes place, and the economy doesn't grow as it should either. So looking at how savings actually behave in the Irish economy is vital.

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