Intro: From an individual perspective, saving and hoarding can appear to be the same thing, but for the economy as a whole they are very different. Hoarding is the increase in willingness to hold money as a store of value. Saving is a measure of real resources in the economy that are used in the production process.
Money is demanded for one of two things: buying goods and services today or buying goods and services in the future. If people believe money will lose its value, they will either spend it now on goods and services or exchange it for foreign currency as a better store of value. Conversely, if people believe that the money they have will retain its value they will be less likely to spend it now and more likely to keep it as a store of value. This is the definition of hoarding.
However, this has nothing at all to do with savings in the economic sense. Any one individual can reduce their own savings by drawing down their cash balances by purchasing something, but the seller of that good or service ends up increasing their cash balance by the exact same amount.
It is crucial to bear in mind when comparing saving and hoarding that there is a difference between the behavior of an individual and that of the economy overall. If an individual receives $1000 and decides not to spend it, then he has seen his savings rise. However, if everyone in the economy is given $1000 out of thin air (a government stimulus check, for example), then although they have more savings in monetary terms they do not have any more real savings. More money does not equal more purchasing power.
In contrast, saving is the amount of production that is not consumed and thus available for investment. Much confusion between these two ideas stems from people’s understanding of economics as being driven entirely by consumption. This leads them to believe that any increase in saving by one individual means that there is less demand for consumer goods.
Hoarding typically becomes prominent during recessions or contractions in the money supply that create conditions of fear combined with a belief that money will retain its value. When people believe that prices will decline, they may be more likely to hold on to their cash rather than spend it. Regardless of whether the money is saved in the banking system or under the mattress, the economic impact is the same. Prices of goods will tend to fall to ensure that the amount of money that remains available to spend becomes worth more, leaving purchasing power unchanged for the economy as a whole. In contrast, an increase in the savings rate in the economy has no bearing on the inflation rate.