State after tax. The income which is saved after

State bank issued a report in December 2014 which was printed
in the news paper dawn. In which they said that the saving touch the lowest
point 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 in
future or in bad time so we can meet our future needs. To save money it is very
important to keep some specific money at the side we can use it at the time
when there is highly need of that money. It has many benefits. In future it
will save us from loans in that time when there is a lot need of that money. To
decision to save and consume is inter linked with each other. The more we
consume less we save and vice versa. There are many factors which influence the
savings individually but we have to focus on inflation, house hold income and
interest rate. Savings are those amount which is saved by every person
everywhere anywhere in the world at the homes or specific places for the use in
future at the time when it highly need of money. But some time it is the sum of
savings of all households in a country. Savings is the money which is saved
after giving all the taxes and doing all the expenditure and after that which
money is save that is saving. House hold income is saved after deducting
consumption from income after tax. The income which is saved after giving taxes
is the gross income which minus taxes or it is the difference of spending on
various goods and services and house hold income. The money we spend is for our
satisfaction and paying utility bills. These expenditures or consumption from
the spending is done for the purpose of obtaning satisfaction or utility. House
hold saving is the aggregate amount of income which is not spend by all
households in a country.

saving literature is base on two major hypotheses. The pioneering work of
Keynes which defines savings as a linear function of income, the first major
breakthrough in savings literature is the permanent income hypothesis of Friedman.
This hypothesis differentiates permanent and transitory components of income as
determinants of savings. Permanent income is defined in terms of the longtime
income expectation over a planning period and a steady rate of consumption
maintained over lifetime given the present level of Wealth. Transitory income
is the difference between actual and permanent income and since individuals are
assumed not to consume out of this income category marginal propensity to save on
transitory income will be unity. Empirical tests of the permanent income
hypothesis are mainly concerned with the effect of initial wealth on savings as
well as the marginal propensities to save out of permanent and transitory
components of income. However, the results of empirical studies on permanent income
hypothesis are divergent for both developing and industrial countries.

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The second major contribution to savings literature comes
from Ando and Modigliani’s life cycle hypothesis whose basic assumption is that
individuals spread their lifetime consumption evenly over their lives by
accumulating savings during earning years and maintaining consumption levels
during retirement. Tests of the life cycle hypothesis are therefore mainly
concerned with the effect of demographic variables such as age groups birth
rates and dependency ratios on savings behavior. The second group of variables
used to describe savings during working life and dissavings during retirement
are financial variables such as interest rates inflation rates available
financial instruments, and initial wealth levels which affect the intertemporal
consumption decisions of households.