Saving and investing (3)

We have known economic flexibility at the country level, so how can it be at the level of families and individuals? Price stability is the most important factor to encourage saving and investment at the same time, and this is achieved in Saudi Arabia, as the monthly inflation rate is constant from August to September, and currently stands at 1.9 percent. There are those who do not like the call to save, even though it is a call related to the family’s ability to face emergencies and avoid the pressures of unplanned debt. Therefore, saving is not the opposite of consumption, nor is it an invitation to deprivation. It is a conscious arrangement between the needs of the present and the goals and challenges of the future. Household saving is affected by many factors, including income, wealth, liabilities, job stability, inflation expectations, and interest rates. That is why one number is not a standard for everyone. In the US Federal Reserve’s 2025 survey, which was published in 2026, 55 percent of adults said they had emergency savings sufficient for three months. The percentage varied between 21 percent for families with an annual income of less than $25,000 and 75 percent for families with an annual income of $100,000 or more. These are American figures that show the impact of income on the formation of financial margin, and do not represent an estimate for Saudi families. This is supported by a study published by the US Bureau of Labor Statistics, as total saving reached 3 percent of personal income in 2022, but it was negative for the lower half of the income distribution, so the most important idea is not to compare a family to others, but rather to build a realistic saving habit that is proportional to its income and obligations. Saving has a direct impact on the individual and the family, as it increases the ability to confront emergencies, supports preparation for retirement, and enables financing of education.And training, helps in forming the down payment for housing, and gives the family flexibility to seize appropriate investment opportunities. This does not mean that every family has one goal or a fixed, ideal amount. The priority usually begins with the size of basic expenses, stability of income, and existing obligations. Saving does not mean stopping consumption. The basic principle is to prepare a clear budget and then allocate a regular amount for saving before unnecessary spending. If the basic expenses are 4,000 riyals per month, what is useful is to review the spending items and plan a savings amount that can be continued without compromising basic needs or resorting to expensive debt. When monetary policy is tightened, the increase in the interest rate is transmitted to the cost of borrowing and financing conditions. This usually limits the purchase of durable goods financed with credit and some corporate investments, thus reducing demand and contributing to curbing inflation. However, this effect does not affect every family nor every market to the same extent, because the transmission of monetary policy occurs through multiple channels, including credit, asset prices, and expectations. It is important to differentiate between physical cash and return-generating liquidity, as physical cash does not achieve a return, and its purchasing power may be eroded if inflation rises. As for deposits or short-term cash instruments, they may achieve a return, but it varies according to the entity, duration, and conditions, and it should not be evaluated in isolation from inflation, liquidity, fees, and product risks. Therefore, it is not correct to say that short-term deposits are always the best option, and it is not correct to base the decision on a certain expectation of the direction of interest. A short duration is appropriate when the need for liquidity is close or when the depositor does not want to commit for a longer period. As forThe appropriate term is related to the goal of saving, the timing of the need for money, and the ability of the person or family to bear the fluctuation of the return. Also, maintaining liquidity for emergencies does not mean stopping investment, as immediate needs require liquidity and stability, while distant goals may require an investment portfolio that is commensurate with the time period and the investor’s ability to bear risks. Changing interest rates affect the evaluation of assets and financing decisions, but it does not guarantee a decline in the value of every asset, as stocks, real estate, and bonds are also affected by profits, growth, supply, demand, and risks specific to each market. At the level of the economy, the spread of financial caution may lead to a decline in consumption, as some companies may postpone their expansion when the cost of financing rises or demand weakens. This is one of the paths that monetary policy uses to curb inflation, but it does not mean that every saving leads to stagnation, or that every deposit of cash means the cessation of productive investment. The result depends on investment opportunities, the cost of financing, demand expectations, and the economy’s ability to direct savings to productive uses. The bottom line is that good saving is not the slogan “hold the cash,” but rather a balance between sufficient liquidity for immediate needs and disciplined investment for distant goals. The more saving is regular and linked to a realistic budget, the greater the family’s ability to protect its quality of life from shocks and to invest opportunities with caution and awareness. In times of crisis, the meaning of family saving changes. The priority is not to maximize the return, but rather to secure liquidity that covers basic needs and to remain available. It is preferable for this liquidity to be built gradually, while organizing obligations, avoiding panic buying, and the importance of reviewing actual needs.Taking into account the stability in prices and availability of goods in local markets as a result of the food security strategy and its many initiatives, the most important aspect remains spending slowly and saving regularly.

Founder of Guatha Counseling Center