State after tax. The income which is saved after

State bank issued a report in December 2014 which was printedin the news paper dawn. In which they said that the saving touch the lowestpoint in the year 2014. And it was on the top from the last five years in 2011.Saving is little part of the money which we save from our income to use infuture or in bad time so we can meet our future needs. To save money it is veryimportant to keep some specific money at the side we can use it at the timewhen there is highly need of that money.

It has many benefits. In future itwill save us from loans in that time when there is a lot need of that money. Todecision to save and consume is inter linked with each other. The more weconsume less we save and vice versa. There are many factors which influence thesavings individually but we have to focus on inflation, house hold income andinterest rate. Savings are those amount which is saved by every personeverywhere anywhere in the world at the homes or specific places for the use infuture at the time when it highly need of money. But some time it is the sum ofsavings of all households in a country.

Savings is the money which is savedafter giving all the taxes and doing all the expenditure and after that whichmoney is save that is saving. House hold income is saved after deductingconsumption from income after tax. The income which is saved after giving taxesis the gross income which minus taxes or it is the difference of spending onvarious goods and services and house hold income.

The money we spend is for oursatisfaction and paying utility bills. These expenditures or consumption fromthe spending is done for the purpose of obtaning satisfaction or utility. Household saving is the aggregate amount of income which is not spend by allhouseholds in a country. Householdssaving literature is base on two major hypotheses. The pioneering work ofKeynes which defines savings as a linear function of income, the first majorbreakthrough in savings literature is the permanent income hypothesis of Friedman.This hypothesis differentiates permanent and transitory components of income asdeterminants of savings.

Permanent income is defined in terms of the longtimeincome expectation over a planning period and a steady rate of consumptionmaintained over lifetime given the present level of Wealth. Transitory incomeis the difference between actual and permanent income and since individuals areassumed not to consume out of this income category marginal propensity to save ontransitory income will be unity. Empirical tests of the permanent incomehypothesis are mainly concerned with the effect of initial wealth on savings aswell as the marginal propensities to save out of permanent and transitorycomponents of income. However, the results of empirical studies on permanent incomehypothesis are divergent for both developing and industrial countries.The second major contribution to savings literature comesfrom Ando and Modigliani’s life cycle hypothesis whose basic assumption is thatindividuals spread their lifetime consumption evenly over their lives byaccumulating savings during earning years and maintaining consumption levelsduring retirement. Tests of the life cycle hypothesis are therefore mainlyconcerned with the effect of demographic variables such as age groups birthrates and dependency ratios on savings behavior. The second group of variablesused to describe savings during working life and dissavings during retirementare financial variables such as interest rates inflation rates availablefinancial instruments, and initial wealth levels which affect the intertemporalconsumption decisions of households.