Savings
The portion of income set aside rather than spent on current consumption.
What is Savings?
Savings refers to income that is not spent on immediate consumption but is instead set aside for future use. Unlike investing, savings are typically held in low-risk, liquid accounts such as savings accounts, money market accounts, or certificates of deposit, where the primary goal is capital preservation rather than growth. Building adequate savings is the foundation of financial health — most financial planners recommend maintaining an emergency fund covering three to six months of living expenses before pursuing higher-risk investments. The savings rate — the percentage of income saved — is a key indicator of long-term financial well-being.
Example
The U.S. personal savings rate, tracked by the Bureau of Economic Analysis, peaked at over 30% during the COVID-19 pandemic in 2020 as spending opportunities were limited. By 2023, the rate had fallen to approximately 3–5%, well below the historical average of around 8–10%, reflecting rising costs and reduced pandemic-era transfers.