Household saving

Household saving is the main domestic source of funds to finance capital investment, which is a major impetus for long-term economic growth.

Definition

In the national accounts, saving is estimated by subtracting household consumption expenditure from household disposable income.

The latter consists essentially of income from employment and from the operation of unincorporated enterprises, plus receipts of interest, dividends and social benefits minus payments of income taxes, interest and social security contributions. Note that enterprise income includes imputed rents paid by owner-occupiers of dwellings.

Household consumption expenditure consists mainly of cash outlays for consumer goods and services but it also includes the imputed expenditures that owner occupiers pay, as occupiers, to themselves as owners of their dwellings.

Comparability

Saving rates may be measured on either a net or a gross basis. Net saving rates are measured after deducting consumption of fixed capital (depreciation) in respect of assets used in enterprises operated by households and in respect of owner-occupied dwellings. Consumption of fixed capital is deducted, as a production cost, from the disposable income of households, so that both saving and disposable income is shown on a net basis. Sometimes, countries have difficulties in estimating consumption of fixed capital for the household sector. The international system of accounts therefore provides for both disposable income and saving to be shown on a gross basis, i.e. with both aggregates including consumption of fixed capital. All figures are shown on a net basis.

Because saving is a residual between two large aggregates – disposable income and household consumption expenditure – both of which are subject to estimation errors, estimates of savings are subject to large relative errors and revisions over time.