Saving is the conservation of money.

Methods of saving include putting money aside in a bank or

pension plan.[1] Saving also includes reducing expenditures, such as recurring costs. In terms of personal
finance, saving specifies low-risk preservation of money, as in a deposit account, versus investment,
wherein risk is higher.

Saving in economics
In economics, personal saving has been defined as personal disposable income minus personal
consumption expenditure.[2] In other words, income that is not consumed by immediately buying
goods and services is saved. Other kinds of saving can occur, as with corporate retained earnings
(profits minus dividend and tax payments) and a government budget surplus.

There is some disagreement about what counts as saving. For example, the part of a person's
income that is spent on mortgage loan repayments is not spent on present consumption and is
therefore saving by the above definition, even though people do not always think of repaying a
loan as saving. However, in the U.S. measurement of the numbers behind its gross national
product (i.e., the National Income and Product Accounts), personal interest payments are not
treated as "saving" unless the institutions and people who receive them save them.

"Saving" differs from "savings." The former refers to an increase in one's assets, an increase in
net worth, whereas the latter refers to one part of one's assets, usually deposits in savings
accounts, or to all of one's assets. Saving refers to an activity occurring over time, a flow
variable, whereas savings refers to something that exists at any one time, a stock variable.

Saving is closely related to investment. 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.

However, increased saving does not always correspond to increased investment. If savings are
stashed in a mattress or otherwise not deposited into a financial intermediary like a bank there is
no chance for those savings to be recycled as investment by business. This means that saving
may increase without increasing investment, possibly causing a short-fall of demand (a pile-up of
inventories, a cut-back of production, employment, and income, and thus a recession) rather than
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. In the long term if saving falls below investment it
eventually reduces investment and detracts from future growth. Future growth is made possible
by foregoing present consumption to increase investment. However savings kept in a mattress
amount to an (interest-free) loan to the government or central bank, who can recycle this loan.

In a primitive agricultural economy savings might take the form of holding back the best of the
corn harvest as seed corn for the next planting season. If the whole crop were consumed the
economy would deteriorate to hunting and gathering the next season.

Interest rates
Classical economics posited that interest rates would adjust to equate saving and investment,
avoiding a pile-up of inventories (general overproduction). A rise in saving would cause a fall in
interest rates, stimulating investment. But Keynes argued that neither saving nor investment were
very responsive to interest rates (i.e., that both were interest inelastic) so that large interest rate
changes were needed. Further, it was the demand for and supplies of stocks of money that
determined interest rates in the short run. Thus, saving could exceed investment for significant
amounts of time, causing a general glut and a recession.

Saving in personal finance

Within personal finance, the act of saving corresponds to nominal preservation of money for
future use. 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.) or to give to
someone else (children, tax bill etc.).

Within personal finance, money used to purchase shares, put in a collective investment scheme
or used to buy any asset where there is an element of capital risk is deemed an investment. This
distinction is important as the investment risk can cause a capital loss when an investment is
realized, unlike cash saving(s). Cash savings accounts are considered to have minimal risk. In the
United States, all banks are required to have deposit insurance, typically issued by the Federal
Deposit Insurance Corporation or FDIC. In extreme cases, a bank failure can cause deposits to be
lost as it happened at the start of the Great Depression. However, since the FDIC was created, no
deposits in the United States have been lost due to a bank failure.

In many instances the terms saving and investment are used interchangeably. For example many
deposit accounts are labeled as investment accounts by banks for marketing purposes. To help
establish whether an asset is saving(s) or an investment you should ask yourself, "where is my
money invested?" If the answer is cash then it is savings, if it is a type of asset which can
fluctuate in nominal value then it is investment.
Investment or investing[1] is a term with several closely-related meanings in business
management, finance and economics, related to saving or deferring consumption. Investing is the
active redirection of resources: from being consumed today, to creating benefits in the future; the
use of assets to earn income or profit.[2] An investment is a choice by an individual or an
organization such as a pension fund, after at least some careful analysis or thought, to place or
lend money in a vehicle (e.g. property, stock securities, bonds) that has sufficiently low risk and
provides the possibility of generating returns over a period of time.[3] Placing or lending money
in a vehicle that risks the loss of the principal sum or that has not been thoroughly analyzed is, by
definition speculation, not investment.[4]

In the case of investment, rather than store the good produced or its money equivalent, the
investor chooses to use that good either to create a durable consumer or producer good, or to lend
the original saved good to another in exchange for either interest or a share of the profits. In the
first case, the individual creates durable consumer goods, hoping the services from the good will
make his life better. In the second, the individual becomes an entrepreneur using the resource to
produce goods and services for others in the hope of a profitable sale. The third case describes a
lender, and the fourth describes an investor in a share of the business. In each case, the consumer
obtains a durable asset or investment, and accounts for that asset by recording an equivalent
liability. As time passes, and both prices and interest rates change, the value of the asset and
liability also change.

An asset is usually purchased, or equivalently a deposit is made in a bank, in hopes of getting a

future return or interest from it. The word originates in the Latin "vestis", meaning garment, and
refers to the act of putting things (money or other claims to resources) into others' pockets. See
Invest. The basic meaning of the term being an asset held to have some recurring or capital
gains. It is an asset that is expected to give returns without any work on the asset per se. The term
"investment" is used differently in economics and in finance. Economists refer to a real
investment (such as a machine or a house), while financial economists refer to a financial asset,
such as money that is put into a bank or the market, which may then be used to buy a real asset.

In business management
The investment decision (also known as capital budgeting) is one of the fundamental decisions of
business management: Managers determine the investment value of the assets that a business
enterprise has within its control or possession. These assets may be physical (such as buildings or
machinery), intangible (such as patents, software, goodwill), or financial (see below). Assets are
used to produce streams of revenue that often are associated with particular costs or outflows. All
together, the manager must determine whether the net present value of the investment to the
enterprise is positive using the marginal cost of capital that is associated with the particular area
of business.

In terms of financial assets, these are often marketable securities such as a company stock (an
equity investment) or bonds (a debt investment). At times the goal of the investment is for
producing future cash flows, while at others it may be for purposes of gaining access to more
assets by establishing control or influence over the operation of a second company (the investee).
In economics
In economics, investment is the production per unit time of goods which are not consumed but
are to be used for future production. Examples include tangibles (such as building a railroad or
factory) and intangibles (such as a year of schooling or on-the-job training). In measures of
national income and output, gross investment (represented by the variable I) is also a
component of Gross domestic product (GDP), given in the formula GDP = C + I + G + NX,
where C is consumption, G is government spending, and NX is net exports. Thus investment is
everything that remains of production after consumption, government spending, and exports are
subtracted.

Both non-residential investment (such as factories) and residential investment (new houses)
combine to make up I. Net investment deducts depreciation from gross investment. It is the
value of the net increase in the capital stock per year.

Investment, as production over a period of time ("per year"), is not capital. The time dimension
of investment makes it a flow. By contrast, capital is a stock, that is, an accumulation measurable
at a point in time (say December 31).

Investment is often modeled as a function of Income and Interest rates, given by the relation I =
f(Y, r). An increase in income encourages higher investment, whereas a higher interest rate may
discourage investment as it becomes more costly to borrow money. Even if a firm chooses to use
its own funds in an investment, the interest rate represents an opportunity cost of investing those
funds rather than lending out that amount of money for interest.

In finance
In finance, investment is the commitment of funds by buying securities or other monetary or
paper (financial) assets in the money markets or capital markets, or in fairly liquid real assets,
such as gold, real estate, or collectibles. Valuation is the method for assessing whether a potential
investment is worth its price. Returns on investments will follow the risk-return spectrum.

Types of financial investments include shares, other equity investment, and bonds (including
bonds denominated in foreign currencies). These financial assets are then expected to provide
income or positive future cash flows, and may increase or decrease in value giving the investor
capital gains or losses.

Trades in contingent claims or derivative securities do not necessarily have future positive
expected cash flows, and so are not considered assets, or strictly speaking, securities or
investments. Nevertheless, since their cash flows are closely related to (or derived from) those of
specific securities, they are often studied as or treated as investments.

Investments are often made indirectly through intermediaries, such as banks, mutual funds,
pension funds, insurance companies, collective investment schemes, and investment clubs.
Though their legal and procedural details differ, an intermediary generally makes an investment
using money from many individuals, each of whom receives a claim on the intermediary.

Within personal finance, money used to purchase shares, put in a collective investment scheme
or used to buy any asset where there is an element of capital risk is deemed an investment.
Saving within personal finance refers to money put aside, normally on a regular basis. This
distinction is important, as investment risk can cause a capital loss when an investment is
realized, unlike saving(s) where the more limited risk is cash devaluing due to inflation.

In many instances the terms saving and investment are used interchangeably, which confuses this
distinction. For example many deposit accounts are labeled as investment accounts by banks for
marketing purposes. Whether an asset is a saving(s) or an investment depends on where the
money is invested: if it is cash then it is savings, if its value can fluctuate then it is investment.

In real estate
In real estate, investment money is used to purchase property for the purpose of holding or
leasing for income and there is an element of capital risk.

Residential real estate

The most common form of real estate investment as it includes property purchased as a primary
residence. In many cases the buyer does not have the full purchase price for a property and must
engage a lender such as a bank, finance company or private lender. Different countries have their
individual normal lending levels, but usually they will fall into the range of 70-90% of the
purchase price. Against other types of real estate, residential real estate is the least risky.

Commercial real estate

Commercial real estate consists of multifamily apartments, office buildings, retail space, hotels
and motels, warehouses, and other commercial properties. Due to the higher risk of commercial
real estate, loan-to-value ratios allowed by banks and other lenders are lower and often fall in the
range of 50-70%.[citation needed]