Planned Savings

Background

Planned savings refer to the amount that individuals, firms, or governments intend to save over a certain period. This signifies an integral aspect of financial planning, budgeting, and overall economic strategy, highlighting the importance of such intentions in the broader scope of economic stability and personal financial security.

Historical Context

The concept of planned savings has been integral to economic thought, influencing personal finance, corporate strategy, and governmental fiscal policies. Historically, planned savings have been distinguished from involuntary or cash-based savings, usually aligning with thoughts from classical economics to modern-day practices.

Definitions and Concepts

Planned Savings: The anticipated amount an entity aims to set aside as savings within a given timeframe.
Unlike contractual savings, such as mortgage repayments or life insurance premiums, planned savings are discretionary and subject to variance depending on income fluctuations and unforeseen financial needs.

Major Analytical Frameworks

Classical Economics

Classical economists emphasize the role of savings in accumulation of capital which drives economic growth. Planned savings facilitate future investment, influencing production capacities.

Neoclassical Economics

Neoclassical models integrate planned savings into their understanding of time preference, where individuals optimize their consumption-saving decisions to maximize utility.

Keynesian Economic

John Maynard Keynes highlighted the interplay between savings and investment within an economy. According to Keynesians, discrepancies between planned savings and actual savings impact aggregate demand, potentially leading to economic imbalances.

Marxian Economics

From a Marxian perspective, surplus value or profits drive savings wherein both individuals and capitalists engage in planned savings to reinvest in production and sustain economic activities.

Institutional Economics

Institutional economics would analyze planned savings within the framework of evolving financial and social norms, regulations, and income distribution mechanisms.

Behavioral Economics

Planned savings are influenced significantly by behavioral biases such as present bias or hyperbolic discounting, showing deviations from rational planning to actual saving behaviors.

Post-Keynesian Economics

For Post-Keynesians, uncertainty and the concept of liquidity preference impact planned savings, questioning the fluid relationship between savings, investment, and consumption.

Austrian Economics

Austrian economists place planned savings within the context of time preference, emphasizing the temporal aspect of saving decisions and their impact on entrepreneurial ventures.

Development Economics

Planned savings are crucial for economic development, as they provide resources for investments in health, education, and infrastructure that underpin long-term economic growth.

Monetarism

Monetarists would focus on the role that planned savings play in relation to the monetary supply and demand, influencing inflation rates and overall economic stability.

Comparative Analysis

The analysis of planned savings across different economic theories reveals various determinants such as time preferences, income stability, propensity to save, and external emergencies. The intent and actual ability to save present a significant overlap but will usually deviate due to unforeseen circumstances, influenced by individual, social, and macroeconomic factors.

Case Studies

Individual Financial Planning: Examination of personal finance strategies during economic booms versus recessions.
Corporate Savings Strategy: Analysis of firms’ savings plans during periods of high profits combined with austerity measures in economic downturns.
Government Fiscal Policies: Strategies implemented by governments planning to save during periods of economic growth against unexpected fiscal demands during crises.

Suggested Books for Further Studies

“The General Theory of Employment, Interest, and Money” by John Maynard Keynes.
“A History of Economic Ideas” by Robert Lekachman.
“Thinking, Fast and Slow” by Daniel Kahneman.
“Capital in the Twenty-First Century” by Thomas Piketty.

Contractual Savings: Regularly obligated payments towards savings or investment like mortgage repayments or life insurance premiums.
Time Preference: The propensity for individuals to prefer consumption today over future savings.
Income Stabilization: Efforts or mechanisms put in place to maintain steady income levels, affecting planned savings capabilities.