What’s Your Savings Rate?

A BBC documentary I was watching recently served as the impetus for this post. The documentary was discussing education, productivity, consumption, and the savings rate in China as compared to Western nations, primarily the United States and the United Kingdom.

Meeting Financial Goals

The one topic that really jumped out for me was the savings rate in these countries. A quick note, a household’s disposable income is the difference between a household’s total income and the amount available for savings and consumption (the money spent on goods and services) after taxes have been paid.

New Reports Suggest Americans Are Not Saving Enough [U.S. News]

Therefore, the savings rate would be the percentage of total income that is saved/invested after taxes are paid; and money is spent on goods and services. With that as the backdrop, we can further state that since we have very little control over taxes, a household’s savings rate will be largely be driven by their appetite for consumption. The more that is consumed, the less that will be available for savings.

Chinese Piggy BankIn “man on the street” interviews in the U.S. and U.K. most of the respondents indicated that they were essentially living paycheck to paycheck, saving very little. Conversely, the Chinese respondents indicated that they were saving anywhere between 30 – 50% of their income.

Why the high savings rate? Most of the Chinese indicated they wanted to save for their children’s education and they also noted the lack of a social security net. In other words, their attitude was that they are on their own and they would need to save to attain financial security. Does that suggest that one of the reasons Westerners save significantly less is because there is a belief that they can spend today – vice saving and investing more – with the knowledge, or belief, that a social safety net will catch them should they fall?

Savings Rates for a Secure Retirement [Bankrate]

The documentary prompted me to do a little research on savings rates to see exactly where we stand here in the U.S. Also, I took a closer look at where my own household stands…about 39% as it turns out.

OCED Savings Rates

Source: OECD (2013), “Household saving rates – forecasts”, Economics: Key Tables from OECD, No. 7. doi: 10.1787/hssv-gr-table-2013-2-en

 And in China…

China Household Savings Rates

Source: National Bureau of Statistics, Flow of Funds data and Urban and Rural Household Survey. 

As you can see from the two charts, the savings rate (past and projected thru 2015) in the U.S. averages 5.1%. Compare that to China where the savings rate in the last year, 2009, is just under 30% in the Combined Urban and Rural Surveys.

My guess is that there are a number of reasons for this significant differences. As I touched on earlier, a different perspective on safety nets, or lack thereof, is probably one reason.

What do you believe may be more reasons why Chinese save significantly more than Americans?  How about you SavvyReader, what is your savings rate? 

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. I don’t know my savings rate – I guess that is the first step for me to take. I know that I put enough in my tsp to get the full match from my employer.

    I think your age matters. I am able to save quite a bit now but when I was younger and in the military, I saved nothing. It was only after retiring and becoming an army civilian that I was able to save anything. I also was able to help my daughter with college and buying her first house.

    I think each person’s savings situation is of course different – don’t know enough about Chinese culture to comment so I’ll just comment on my specifics.

    • I wasn’t able to save much during my military career either … until the last few years anyway. When I first started educating myself on personal finance concepts and practices, I often read that people should try and save 10 – 15% of their income. While that is probably a good place to start, my experience has been that people should be saving more. This table from Bankrate outlines their suggested savings rates for individuals based on age, income level and accumulated savings.

      While I don’t believe there is a single ‘right’ answer for everyone – as you note, each situation is a little different – I think it’s fair to say that too many Americans aren’t saving enough. In fact, lots of Americans have a negative savings rate. The hyper-consumerism, which often leads to significant debt, in our country is setting a lot of people up for a less than satisfying retirement and discomfort in their golden years.

  2. Great article. I think another number that would be interesting to research is the breakdown on age groups in the United States, i.e., 10 year spreads such as the 20 – 30 age group up to 50 – 60 age group. Just speaking from my view point (age 53), our (wife and I) savings rate is significantly higher than than it was when we were in our 20’s but then again we now have more disposable income. This is also most likely do to the fact that we’re approaching retirement age and want to ensure that we don’t run out of money. If we could just get those 20 and 30 somethings to avoid the $600 – $700 per month car payment and fund their 401(k)’s and/or IRA’s!

    It would also be interesting to see the Chinese savings rate based on a family’s annual income. My guess would be that the savings rate would be higher for the those in lower income brackets versus those in higher income brackets in part to the fact of no social security safety net to fall back on……….

    • “…our (wife and I) savings rate is significantly higher than than it was when we were in our 20′s but then again we now have more disposable income. This is also most likely do to the fact that we’re approaching retirement age and want to ensure that we don’t run out of money.” Great points. That is also the case in my household, where the wife and I are in our late 40s and eyeing retirement anxiously. Another factor for us is that we got a later start – early 30s – than desired, and while I don’t feel as though we are trying to “make up” for lost time, I am inclined to be as aggressive as possible with respect to contributing to retirement plans.

  3. Your savings percentage prompted me to figure out my own. You have us beat. 🙂 Not counting the extra we put on our mortgage we’re saving 34% of our gross. I’m sorry to see that U.S. rates as a whole are declining.

    • That is a pretty stout savings rate. Nice!

  4. My grandparents could remember the depression and they were very frugal and big savers. For as much bad news as there is, and as much as we like to complain, we haven’t had a REALLY bad economy in several generations. It doesn’t surprise me that in countries where horrible economies are a recent memory the savings rates are higher.

    • Great points, Paul. Your observation about older Americans being more frugal and effective savers is reminiscent of my recent SavvyInterview with Mr. Andy Rutter, the 80+ year old father of a friend that gave some great advice in the interview.

  5. I think their difference in culture has a lot to do with it. Chinese people are known to be savvy people when it comes to money here in our country, and most of them have proven that they really are better at handling their money than other races.

    • No doubt that culture plays a significant role. Unfortunately for too many Americans, our culture of consumption stands in direct conflict with developing, and being actively engaged with, a solid savings/investment plan. Thanks for adding to the conversation, Mark.

  6. I only know what I have seen in documentaries and such, which is that many of the children of Chinese farmers work in the cities in order to make more money. I saw one documentary where the daughter left her family and went to live in a larger city, basically living in squalor, in order to make money to send home to her family. The Chinese people have had hard times like a lot of people in the US right now and have learned a very valuable lesson from it. I believe that is why they save so much, they want a better life for their loved ones as well.

    • That is also my understanding, Karen. The Chinese seem to put significant effort into making sure each generation works not only to secure their own future, but assist their parents as well. Additionally, it seems as thought even the poorer Chinese, those that put in long hours in the field for very little money, still place a premium on saving a high percentage of their earnings.

Leave a Reply to Valerie Cancel reply

Your email address will not be published. Required fields are marked *