National Saving

Updated Mar 23, 2023

Definition of National Saving

National saving is the total amount of money that a country saves over a certain period of time. That means it is the sum of all the money that households, businesses, and the government save. It is made up of private saving plus public saving, and is usually measured as a percentage of the country’s gross domestic product (GDP).

Example

To illustrate this, let’s look at an imaginary economy called Saveland. Let’s say that Saveland’s GDP is USD 100 billion. Now, assume that all private households together save USD 900 million, the domestic companies save USD 600 million, and the government saves USD 500 million. In that case, national saving adds up to USD 2 billion (i.e., 900 million +600 million +500 million), or 2% of GDP (i.e., [2/100]*100).

Why National Saving Matters

National saving is an important indicator of a country’s economic health. A high saving rate indicates that the country is able to save more money than it spends, which is a sign of economic stability. On the other hand, a low saving rate indicates that the country is spending more than it is saving, which can lead to economic instability. Therefore, it is important for governments to monitor their national saving rate and take measures to increase it if necessary.