In this day and age, the term 'saving for a rainy day' no longer means hoarding cash and jewellery in a safe box.
While there are still those who hideaway valuables and assets in a state of perpetual and immobile liquidity, thinking that it is the safest way of preserving money, new trends have shown us for quite some time that all they are doing is keeping their funds frozen. That hoarding is a way of a negative or inactive saving that only makes the assets being hoarded shrink in value over time. This practice is one of the reasons behind funds being unable to assume their economic function in terms of investment and growth, so as to benefit both the individual and the community.
So, there is a huge difference between hoarding and saving. The former is a technique that "freezes" the flow of cash while the latter helps inject the economy with cash to better the lives of others in numerous ways. For instance, one saves money to buy a house, a father saves money to send his children to university, and an investor gathers money to set up an economic project.
All this is not considered as withholding money from being exchanged in the market. Rather, it is collecting a certain amount of money for investment in a certain project and, consequently, for moving the wheels of the economy.
Some people have enormous amounts of money but it is frozen in the form of land or property meant for residence or leasing, rather than being active in other fields of investment with value-added returns. Another form of heaped up and inactive funds is represented by huge liquidity deposited in banks.
Banking expert Ibrahim Hijazi thinks hoarding up money begets negative returns. All gains that could have been achieved by putting the funds in an investment vehicle, such as bonds, remain unrealised. And, without this growth, time eats into the value of the original capital, which shrinks in actual value while remaining numerically constant.
Hijazi said: "Despite the spread of banks, a broad section of people continue to shy away from dealing with them because they refuse to receive interest, which they see as Riba – prohibited by the Shariah.
"They look for a way to invest their funds through small family companies or investors, or in trade and real estate. This phenomenon is exploited by unscrupulous people leading to scandals, such as those not long ago of fraudsters duping people with the promise of easy profits in get rich- quick schemes. These people exploited their victims' trust and their need to invest their funds away from the banking system for set profits."
Freeing up frozen fortunes as a developmental strategy is pursued by many countries to achieve financial, economic and social targets. The saving process is based on two basic foundations – saving potential and saving desire. The former is the individual's potential to set aside part of his income for the future, and it is measured by the difference between income and expenditure.
The latter depends on the individual's way of life and behaviour. Accordingly, the saving potential does not depend on the size of income, but is a relative matter that varies from one individual to another and changes according to circumstances.
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