Explanation: Factors influencing Household Savings:

• Income- High-income households usually allocate more income to savings than consumption. Because they cannot fulfill the most desirable items, low-income households consume more than they save.
• Interest rate- High real interest rates make savings more attractive. The high nominal interest rate will be useless if inflation is also high. When it is lower than the inflation rate, the actual returns cannot offset the decline in the purchasing power of money. Hence, households are reluctant to save.
• Future income expectation- Households increase consumption rather than saving when they are optimistic about their future income. It commonly occurs during economic expansion.
• Wealth-Increased asset value encourages households to consume more. As the assets value rises, households find reaching their wealth accumulation target without saving more.
• Tax-Higher personal taxes reduce disposable income thus decreasing money allocation for consumption & saving.

Source: Ramesh Singh