Saving

[1] In terms of personal finance, saving generally specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is a lot higher.

By not using income to buy consumer goods and services, it is possible for resources to instead be invested by being used to produce fixed capital, such as factories and machinery.

Saving can therefore be vital to increase the amount of fixed capital available, which contributes to economic growth.

In the short term, if saving falls below investment, it can lead to a growth of aggregate demand and an economic boom.

Classical economics posited that interest rates would adjust to equate saving and investment, avoiding a pile-up of inventories (general overproduction).

Thus, saving could exceed investment for significant amounts of time, causing a general glut and a recession.

A deposit account paying interest is typically used to hold money for future needs, i.e. an emergency fund, to make a capital purchase (car, house, vacation, etc.)

In extreme cases, a bank failure can cause deposits to be lost as it happened at the start of the Great Depression.

The capital markets equilibrate the sum of (personal) saving, government surpluses, and net exports to physical investment.