Save like a developing country: Global savings rates around the world
The only data I’ve been able to get for all the countries at once, is for the year 2010. Luckily, it isn’t so far off from 2013, and the savings rates at a quick glance, haven’t really changed much from 2010, except in the fractions of percentages:
Here’s the chart I created in order of highest to lowest savings rates around the world for 2010
(Click to biggify anything)
 
China and India are the two towers of savings you see on the left.
New Zealand and Denmark are the two towers of not-saving you see on the right.
SAVE LIKE A DEVELOPING NATION FOR OPTIMAL RESULTS
It’s cultural as well, I’m sure, but China and India are blowing everyone else out of the water in terms of savings rates.
…OR AT LEAST SAVE LIKE SOME EUROPEANS
Aside from India or China, if we take a look at the next tier of double-digit savers from Turkey, France, Spain, Germany, Belgium and Portugal, their savings rates of 10.20% to 19.50% are nothing to sneeze at.
I received an email from a lovely reader (*waves!*) in Germany who told me that she recently read a statistic that young people (aged 14-25) are now saving about 28% of their income, and 20% of them, have already started saving for retirement, above their national average of 13.6%.
She also goes on to note that they can save 28% because they’re also living at home, so it helps.
AND WHERE DO WE STAND?
Clearly for Canadians and Americans, we’re not doing as well as we could.
The estimated savings rates for 2013 are actually lower than that.
Canada is set for a savings rate of 4.3%, and the U.S. is set for a savings rate of around 4%.
Australia will also up its game at 12.10%.
In detail, here are the specific numbers:
Data taken from: GFMAG, Business Week
ARE YOU KIDDING ME? LESS THAN 5% IS NOT ENOUGH
If we only save about 4.3%, it is for one thing, not even close to the PF maxim of save at least 10%, and certainly not enough to secure your future.
I like 15% – 25% as a new savings maxim for the future.
Let’s say you make $30,000 a year.
Your net income is $25,942, which is about $2161.83 a month.
4.3% for Canada, is about $92.96 a month.
In 30 years, it’d be $93,379.71.
Now it makes so much more sense why the average retirement savings for a person about to retire is only about $100,000.
Furthermore, with 4.3% as the average, it means that there are people saving less or more than that!
WE AREN’T SAVING ENOUGH!
In contrast, if you saved like other countries mentioned above, it’d look like this with a $30,000 salary per year:
Looks like China, India or Turkey would be my role model if I was earning $30,000 gross a year.
Obviously if you earn more, you could afford to save a bigger percentage of your net income, but you’d have to hit at least the same absolute dollar savings of about $10,000 a year to reach those numbers.
It’s why it’s better to look at your net savings per year rather than as a percentage of things.
You can get lost into thinking that you’re doing well, and you can afford to upgrade your lifestyle when you should really be doing much more.
That’s a rather high percentage of savings however, almost 40% is crazy, especially with the higher cost of living here versus a developing nation.
How do you figure out how much to save without starving?
To do all of the above, you need to know how much you spend on average, and where you can cut back on your spending.
If you have NO IDEA where your money is going, you can’t make any changes.
Track your spending, come up with a budget, and stick to it.
Estimations are for people who don’t have facts.
If I only estimated how much I spend each month rather than really tracking it, I’d be consistently under by a solid 30% – 50%, no doubt, and I would have been hard pressed to remember each category as an average each month.
Plus, I wouldn’t be saving as much as I am today, because I’d be out there wasting my money on crap without knowing where it’s really going.
I’d probably be appalled at my spending once faced with the numbers on some debt show that I would eventually end up on.
HOW MUCH DO YOU THINK YOU NEED TO SAVE?
37 Comments
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Sherry of Save. Spend. Splurge.
They are very VERY good at saving in India and China. Most of the folks I meet from there, back this up when I talk to them.
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www.livetolist.wordpress.com
Where’d the figures come from? Australia’s employers put 9% of your salary away for retirement. Or is this independent savings (like for a rainy day or the like)?
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Mochi & Macarons
This is only for independent savings 🙂
I love that Australia puts away 9%.
Is that a rule? Do you have to match 4.5% to get the 9%?
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saverspender
livetolist wrote back:
“The 9% is the LAW and all employers have to offer that once you’re employed over a certain threshold (something like 20hrs a week or something). It’s due to be increased to 12% over the next few years. We don’t co-contribute to that – and now, if we do, the annual total has to be less than $25,000 so we don’t get taxed extra”
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I think that’s fantastic!!! We don’t have that here, but we should.
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Nomad Capitalist
Yeah, let’s give businesses more reasons to pack their bags and move to better economic climates. Why is it the job of your boss to save for your retirement?
This article proves the Chinese have it right. They know how to save and to protect themselves. And they don’t let their money sit and rot in an illiquid bank either – they lend it to their family and friends to be entrepreneurs or improve their education.
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saverspender @ save. spend. splurge.
Actually some Chinese do let it sit in their bank account or under their mattresses, but that is neither here nor there.
I don’t think the Chinese necessarily have it right on all fronts, just on the saving one. They have a lot of problems that they still battle with and have to work through. This shining example of fantastic saving is only one facet of them.
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Janine
Very interesting statistics. This concerns me. I know I’m socking away more than 5% but I don’t think our generation is doing it’s part… which could mean a lot of trouble down the road!
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Budget & the Beach
This doesn’t surprise me at all-to see the numbers for the US and Canada. It seems we live more for the now. It’s un-American to be so thrifty and “uptight” about money. But I think with just 10% more effort everyone, including myself would be better off.
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Mochi & Macarons
I think there’s a big stereotype and a generally unfriendly attitude towards being cheap, acting cheap, or not being generous (including with yourself).
10% is really the minimum required, especially if you get an employer match as well.
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Budget & the Beach
I meant 10% more effort than what they are already doing…but I guess for some that actually might be 10%. lol
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addvodka
I save a little over 21% of my regular income (fortunately, 11% of that is my employer match – so 10% comes from my own pocket). 18% of my income goes into my retirement account, 1% into my TFSA, 2.5% into an emergency fund of sorts.
After that, I save ALL of my extra income from my websites, staff writing, and online work. This fluctuates, but there is a base, regular amount each month that is about 10% of my regular income that goes into my TFSA and then dispersed throughout my savings accounts (travel, emergency fund, etc) (and luckily, that is extra income so I don’t have to dip into my regular income to save this amount). The extras over the base amount goes toward my goals savings buckets, whatever they may be at the time.
Phew!
But, like Makinthebacon, I never feel like I’m saving enough, maybe because 11% is employer contributed, and the extra income is just slotted right into savings, so I’m really only saving 10% of my regular income. Even though I’m saving much more.
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Mochi & Macarons
I LOVE employer matches!!!
You are doing an extremely good job. Don’t beat yourself up over it. 21% is .. frigging fantastic.
As I always note in my posts, I’m a freelancer and I AM the employer, so I always have to save a lot more than usual because I have no plan to fall back on, and I am not going to rely on the government either (I don’t take an ‘earned income’ salary each year, I do it in dividends, and therefore don’t have any contribution room)
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Girl Meets Debt
I can’t start saving yet, until my debt is paid off, which will take a few years…Maybe then I will change my name to Girl Meets Savings hehe.
But when I DO start saving, I definately plan on saving more than just 4.3%-
Mochi & Macarons
I agree with clearing your debt first, especially if it’s at 15% – 30% Credit Card rates
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Liquid_Independence
Great study. Interesting how some European countries (Spain, Ireland, etc) have higher savings rates than Canada’s yet they needed bailouts from other countries. I guess personal and sovereign finances really don’t align that well within countries. I agree, 4% isn’t enough. I’m not even sure if that number includes the people with negative savings, such as someone who spends 10% more than they make. Dun dun dun….ಠ_à²
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Mochi & Macarons
People are definitely spending more than they make. CanStats put it at about 165% more than they make for disposable income, so for every $1 in disposable income, Canadians on average are spending $1.65.
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financialuproar
Well, Japan is the oldest country in the world, so I’d expect their savings rate to be low. Most of the European countries that are more restrictive in their immigration practices are pretty low too. So I think demographics is the main factor here.
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Mochi & Macarons
Japan has a lot of old people, that’s true, but it’s also because their income disparity is not as high as in Western countries. They tend to cluster together in income groups as well.
Many European countries don’t have high rates of consumer debt because they never had credit cards before. It’s a new concept for them. Their idea of a credit card before, was a debit card that you had to pay at the end of the month.
The prevailing idea is for everyone to pay in cash, so as a result they don’t have debt, interest to pay, and are able to save more, plus it’s a cultural thing to not get into debt.
Now that credit is becoming available and accepted in Europe, things might change.
As for the rest of the countries that don’t seem to save as much, they also have some generous pensions from their country, unlike in Canada.
In France, it is INSANE how much money you can get when you retire, but then you think of how much they’re being taxed and it makes sense… somewhat.
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Sara
My partner’s work matches retirement contributions up to 4%, so we’re taking full advantage of the match, but not putting in anything over and above.
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Mochi & Macarons
I’d agree with that. I did something similar when I first started, 4% is the max I contributed to my employer’s retirement plan, and then when I cleared my debt, I put the excess into my personal retirement plan at a bank until I maxed out my personal contributions for the year.
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Sara
I like that. I’ll have to remember it for once we clear our debt!
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Mochi & Macarons
*thumbs up* You’re doing the right thing. You shouldn’t turn down what is essentially 100% return with your employer’s match, even in debt.
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MakintheBacon$
I never feel like I’m saving enough of my income! I took a look at my spreadsheet from last year and I averaged at saving about 26% of my income. I had a couple of negative months, which were due to a couple of big trips. Neither of which I regret though. 😛 I would like to be even more conservative this year and increase that average to 30%, which may prove to be more difficult, considering I just bought a house last year. But never say never…
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Mochi & Macarons
26% is FANTASTIC!!! 30% would be better, but I hear you on taking big trips and enjoying them 🙂
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Anne @ Unique Gifter
Proud to say that my household is a positive outlier. We save a bit more than 50% of our income.
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alana
“…That’s a rather high percentage of savings however, almost 40% is crazy,
especially with the higher cost of living here versus a developing
nation…”
I meant your assumption that cost of living is higher in the developed world -
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alana
dont necessarily agree with your argument that cost of living is higher in a developing country. I am from and live in a developing country in the Caribbean but I’ve also lived in the developed countries for periods of time and let me tell you, housing and food take up significantly more of ones paycheck here than housing and food cost in the developed world. While these costs are high for us, we still end up with a healthy savings rate cause saving is valued in our culture. We dont go on two, three vacations a year, we dont have daily coffee shop habits and we generally avoid other lifestyle inflating habits to in order to save our cash. Welfare and other social services provide a lot of benefits for people in the developed world thus their is less impetus to save there cause you know the government is going to take care of you. We in the developing world dont have the same social safety nets thus we have to save in order to safe guard our future.
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Mochi & Macarons
That’s a good point.
I guess I am looking at it from a person in a First World country, where living on the minimum takes at least $1500 a month even if you’re careful and paying for a whole family in a city, and that means having a job that is at least $20,000 gross a year which leaves them only $18,000 net.
$18,000 net goes to living and $0 can be saved.
At most, I’d wager people can save about $2000 a year earning $20K as the single earner for a family.
I’m also taking into account that we have a strong winter here, and you can’t just say “I’ll go without a coat”, because you will freeze and die.
There are clothing and food banks to help, but many people have too much pride to take handouts.
In contrast, if you’re in the Caribbean, you may not have to worry about buying things like boots for the snow, or heavy jackets, but it evens out when you consider that your money (as you said) goes towards food.
How much are you able to save?? Is it 40% like in China?
They have a low cost of living there too and I wouldn’t consider them a First World country. From what I can see they work very, VERY hard to do whatever it takes from my trips there.
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Pauline
What I need to save= what I make – absolute needs – occasional treats. The more the better.Like you I do the work-travel-work-travel thing and any saving is a day of holiday, a plane ticket, a hotel night… quite motivating!
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Mochi & Macarons
Exactly. It’s thinking about your money in terms of what you’ll be able to use it for later, rather than it being a financial prison.
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Suki
I’m one of those people who have brought down the USA average. We have an emergency fund of $1000 and beyond that we primarily have been paying down debt. My goal is to save 1% this year. We move slow…
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Mochi & Macarons
Debt is important to clear off, don’t feel badly about that — you are still improving your net worth.
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mochiandmacarons
Debt is important to clear off, don’t feel badly about that — you are still improving your net worth.
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I’m surprised about this statistics, never thought India and China were the leaders! I heard Japanese people were really good savers in the past, but now i think because of their age they’re now using their saving
As for me, I’m 26, live with my parents, and after covering half of family expenses, I’m able to save 40% of my income. Unfortunately, the average Mexican savings rating is about 6%, little bit higher that our other north american comrades, but too far from other developing nations