Saving Money

Money is a depository of value because we measure the worth of all merchandise in terms of their money equivalent. If merchandise A is worth 1 dollar, merchandise B is worth 2 dollars and merchandise C is worth 4 dollars, then A is worth 1/2 of B and 1/4 of C; B is 2 times A and 1/2 of C; C is 4 times A and 2 times B. We have illustrated how money serves as the holder of value which could exchange for an equivalent value of any merchandise.

With that in mind, we now could imagine why a person who has much money could acquire plenty of merchandise and a person without money could not acquire any merchandise at all. Going further, we now know why a person who keeps more than he spends gets rich.

A person who deliberately prevents the money he owns from being exchanged for any merchandise is doing the act of saving money; but when that person deliberately seeks to acquire as much money in circulation in order to control the volume of merchandise exchange, the person is doing the act of hoarding.

We learned in elementary economics that “saving is the act of postponing consumption”; we literally postpone eating a banana for tomorrow if we have eaten enough. We do not eat the banana not because we intend to hoard it, but we simply plan to eat the banana at the proper time.

Since money could represent a piece of banana, we could say that we had saved the money equivalent of one banana by reserving it for another day. Now we can say that putting our cash in the bank is not the only way to save money.

We save money by reducing expenditure on leisure like buying the less expensive version of a merchandise that serves the purpose of a more expensive popular version. We can save money by recycling used merchandise. The act of saving money differs from “capital build-up or capital accumulation”.

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