Savings Attitudes

The analysis of savings attitude is generally taken from two perspectives; macroeconomic and microeconomic (household) perspectives. The macroeconomic methodology concerns itself with the influence of economic indicators such as GDP growth rate, rate of inflation, money supply, interest rate, etc., on the saving rate in an economy. At the micro level, individual saving and consumption attitudes, particularly households, have a particular relevance for financial stability of the economy. Poor savings attitudes induce financial disequilibrium as financial intermediation functions becomes difficult to realise (Modigliani & Brumberg, 1954; Nwachukwu & Odigie, 2011).
Review of theories that explains factors that determines household’s savings can

Most reviewed works employed income per capita or GDP growth rates as relevant proxy for income. Theoretically, per capita income has a positive impact on savings since richer individuals are able to afford the luxury of saving so as to assure future consumption.
As explained from the lifecycle, higher income levels are associated with higher consumption and hence savings attitudes. Per capita GDP, a proxy for how much each worker contributes to national output and hence, income received from engaging in economic activity, can sometimes give misleading results. for instance, a higher GDP does not necessarily imply all workers on average have increased income. This is especially the case with most developing economies, where there are few “rich” who give bulk contribution to output, as against the majority “non-rich”. That notwithstanding, a general rise in output is theoretically associated with higher consumption and

The structure of tax system can affect households saving in the spheres of one’s lifetime wealth, and the interest return on savings. Taxes are classified as either Direct (income) or indirect tax. According to Poterba (1994) and Callen & Thimann (1997), due to the progressive in nature generally in income taxes, households with high income (who generally save high) are taxed much more, and more so, the active population that makes greater savings pay bulk of income (direct) taxes. Indirect taxes on contrary, are proportional to one’s spending and hence evenly spread across income groups and age groups. The degree with which government utilizes direct and indirect tax mix, may affect high savers and working age groups saving