Key to Running the Economy: Spending or Saving?

The economy signifies the flow of money in the market and is a reflection of the country’s financial standing among other worldwide economies. Many people believe that saving strengthens an economy more than spending. This belief is not entirely true.
Saving is defined as that part of income not consumed currently. Though it appears prudent at an individual level, too much saving can slow down the economic activity. If, for example, a businessman decreases the salaries of his employees to save more, the employees would be forced to cut down their household expenditure. They may stop going out with families or skip dining out or shopping. In this way, overall demand falls, business starts earning less, and it causes a continuous downward spiral of reduced spending. Aggregately, it could result in a big setback to the economy.
When people spend more, there is more cash circulating in the economy, which is what keeps it alive and growing. Instead of just saving, one should invest a portion of his or her income. Investments in stable stocks or other financial opportunities provide regular returns, as opposed to money that is kept idle as cash or in low-interest savings accounts.
Investment not only benefits individuals but also contributes to business expansion, job creation, and innovation that strengthen the economy from within.
The take-home message is that spending propels the economy, whereas investment is a smarter alternative to saving. As a society, we should incentivize consumption and investment by creating new markets with quality products at reasonable prices, while balancing reasonable profits for producers with a sense of satisfaction among consumers.
The real key to running a strong and thriving economy, therefore, lies in spending, not in saving. Spending ensures that there is a continued flow of cash in the market-money that is the lifeblood that keeps an economy dynamic, growing, and resilient.