Saving is money that households add to their wealth. They may invest it in real fixed assets like land (Non-Produced Assets), a new home or an extension (Fixed Capital Formation), or they may reduce debt or increase investments (Financial Assets).
Household Saving is what is left after Household Final Consumption Expenditure has been deducted from Gross Disposable Income. As we saw, disposable income had already deducted interest, most taxes and other charges.
Gross Saving is calculated before Capital Taxes (inheritance tax or capital acquisitions tax) has been deducted.
Household Saving also includes the Adjustment for Pension Entitlements to take account of saving in pension funds.
We talk about ‘Gross’ Saving because this is before any depreciation or Consumption of Fixed Capital (CFC) has been deducted. Gross Saving minus CFC is 'Net Saving', but this term is rarely discussed in National Accounts.
Household Saving is an important source of funds for capital investment, and so a source of long-term economic growth. High Household Saving can therefore be a positive indicator for the long-term health of the economy. On the other hand, high saving and low Final Consumption Expenditure can be a sign of lack of confidence by households which is troubling for the short to medium term.
Household Saving is measured in millions of euro, and is different from the Household Saving Rate.