This report investigates the importance of household savings, its relationship with the economic growth of a country, and how some countries, by adopting innovative solutions and policies, have inculcated a savings mindset among their citizens. The report further delves into the culture of household savings in Saudi Arabia, and how the country’s household savings rate can be improved to a global standard of 10 percent that is recognized as the minimum level to ensure long-term financial stability. Household savings and investment are two vital cogs in the proper functioning of an economy.
An acceptable rate of economic growth typically requires an adequate rate of investment and therefore, a satisfactory supply of savings. While investment is recognized as a goal of economic policy as it improves productivity and increases the competitiveness of an economy, savings form the core of capital formation that fuels economic development. Nations that take conscious initiatives to encourage and nurture formal savings are more likely to witness higher levels of sustainable economic growth, human development and living standards.
The main objective of this paper, in addition to identifying the core factors that impact a country’s household savings rate, is to identify achievable policies and initiatives, which, if implemented, may lead to improvement in the savings mindset of the Saudi population. We used our analysis, especially of the successful policy adoption by other nations, to come up with relevant policy recommendations.