HOUSEHOLD SAVING

Household Saving Patterns in the United Kingdom



Household Saving Patterns in the United Kingdom

Introduction

Household Saving rates are a very important consideration in gauging the economical well being of Society. Countries bearing higher household saving rates are bound to succeed. Since the financial turmoil has reached at its peak that's why there has been a drastic decline in Household saving rates in the current conditions.

Life Cycle Model

One of the most important methods in measuring the level of household saving rates is through life cycle model. Specially in the case of China, this observation holds true. Taking Chinese economy into consideration, it has been observed that life cycle models represent an effective measure of measuring household saving rates. There has been a surge in the household saving rates of Chinese households in the recent past. Comparison of recent years shows us that the surge in Household saving rates in China is due to Life Cycle models (Banerjee et al, 2010).

Demographic Structure

Not only the Life cycle models but also the demographic structure has been resulting in the growing Household Saving rates. The logic applied here is that Elderly Parents depend on their adult children for support. Social Security provisions are at a minimum for Chinese Workers. Another interesting insight related to Chinese Economy is that sons prove to be a more reliable financial support for elders than daughter (Banks et al, n.d).

So Life cycle method in measuring the level of Household Saving rates is a fundamental method in the case of Chinese Economy. The Surge in Chinese Household Saving rates has largely been attributed to Life Cycle issues (Berry et al, 2009).

The savings of Parents are largely influenced by the number of children they have. Having a large amount of children would result in lower savings for the parents. Whereas, having a low proportion of children would result in higher Household Saving rates. This seems prudent in the case of Chinese Economy.

Fertility and Income Growth

The relation between fertility and income growth is of a direct nature. China used to have a large population. A lot of emphasis on family planning was stressed in order to have the population ratio under control. With lesser fertility, not only the income growth got increased but also there was an increase in Household Saving. The comparison of daughters versus sons also helps us in getting to the level of Household Savings in China. Interesting insights are on offer in Chinese Economy.

Life Cycle model is not used in all countries for measuring the Household Saving rates. Its importance is highly significant in Chinese Economy. Savings decisions are hugely influenced by the pace of fertility. Households having higher future income growth, would want to increase their family. There is a high possibility that they will look to have more children in the future (Carolan et al, 2012).

Well Being of Economy

The factor of Household Savings has huge implications on the well being of the economy. The outlook for Aggregate Demand is influenced by the ...