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Savings Rate

What is a 'Savings Rate'

A savings rate is the amount of money, expressed as a percentage or ratio, that a person deducts from his disposable personal income to set aside as a nest egg or for retirement. The cash accumulated is typically put into very low-risk investments (depending on various factors such as expected time until retirement), like a money market fund or a personal individual retirement account (IRA) composed of non-aggressive mutual funds, stocks and bonds. Next Up National Savings Rate Disposable Income Average Propensity To Save Savings Account

Explaining 'Savings Rate'

For years, the savings rate in the United States has declined. In the 1970s and 1980s, personal savings rates were in the 5 to 7% range but decreased to 1 to 3% range in the 21st century. The savings rate went up in the United States starting in 2008 with the onset of the recession, reaching 8%, but it has come back down, continuing the overall negative trend for savings in the U.S. economy. As of June 2016, the savings rate in the United States is 5.5%. Since the Federal Reserve started tracking the savings rate in the United States, the highest the rate has been, was 17% in May 1975. In sharp contrast, the Chinese savings rate is around 30%.

What Affects the Savings Rate?

The national average savings rate is often determined by how a particular culture views debt, values possessions and how an economy is structured. Economies oriented towards consumption have lower savings rates; in the United States, consumption constitutes around 75% of the economy. Economies like China's, which is oriented more towards investment, have higher savings rates. Savings rates tend to fall lower as populations age and spend their savings rather than adding to them. Savings rates are affected by wage growth, as well as central banks' interest rate policies. Other factors lowering savings rates include increasing wealth, increasing access to credit and a rise in labor productivity.

Calculating Savings Rate

The savings rate is the ratio of personal savings to disposable personal income and can be calculated for an economy as a whole or at the personal level. The Federal Reserve defines disposable income as all sources of income minus the tax you pay on that income. Your savings is disposable income minus expenditures, such as credit card payments and utility bills. Using this approach, if you have has $30,000 left over after taxes (disposable income) and spend $24,000 in expenditures, then your savings are $6,000. Dividing savings by your disposable income yields a savings rate of 20% ($6,000 / $30,000 x 100).


Further Reading


Brothers, household financial markets and savings rate in China
www.sciencedirect.com [PDF]
This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household …

Public Finance and the High Savings Rate in China <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-ZSHK201006013.htm' />Public Finance and the High Savings Rate in China [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-ZSHK201006013.htm'>PDF]
This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household …

The savings-inflation puzzleThe savings-inflation puzzle
www.tandfonline.com [PDF]
This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household …

Demographic change and the UK savings rateDemographic change and the UK savings rate
www.tandfonline.com [PDF]
This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household …

dependency ratio, foreign capital inflows and the rate of savings in Pakistan <span style=[with comments]' src='/thumbnails/?img=https%3A%2F%2Fwww.jstor.org%2Fstable%2F41259604' />dependency ratio, foreign capital inflows and the rate of savings in Pakistan [with comments]
www.jstor.org [[with comments]' href='https:/api.miniature.io/pdf?url=www.jstor.org%2Fstable%2F41259604'>PDF]
This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household …

The Impact of Dependence Ratio on Household Savings Rate <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-ZKRK200901006.htm' />The Impact of Dependence Ratio on Household Savings Rate [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-ZKRK200901006.htm'>PDF]
This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household …

The Chinese corporate savings puzzle: a firm-level cross-country perspectiveThe Chinese corporate savings puzzle: a firm-level cross-country perspective
www.nber.org [PDF]
This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household …

Demographic Structure and Savings Rate: Based on the Endogenous Demographic Structure <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-JRYJ201103003.htm' />Demographic Structure and Savings Rate: Based on the Endogenous Demographic Structure [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-JRYJ201103003.htm'>PDF]
This study analyzes the effect of the number of brothers an individual has on that individual's household savings rate under the current underdeveloped household financial market in urban China. I show that having an additional brother reduces an individual's household …



Q&A About Savings Rate


When we talk about saving , what exactly are we talking about ?

We are talking about putting money aside in order to use this money at some point in the future .

Why do some economies have higher average national savings rates than others?

Economies with high consumption levels generally have lower average national savings rates than those with low consumption levels because consumers prefer spending their money rather than putting it into long-term investments like stocks or bonds which could lose value over time due to inflation or other economic factors affecting their prices.. Countries whose economies focus on investment rather than consumption generally have higher average national savings rates since investors typically want their money working hard

Is there only one way to save ?

No , there isn't just one way - there are many different ways !

What is the savings rate?

The savings rate is the amount of money, expressed as a percentage or ratio, that a person deducts from his disposable personal income to set aside as a nest egg or for retirement.

How can you save on recurring costs?

You can reduce expenditures by cutting back on recurring costs.

What factors affect your savings rate?

Your age and how much wealth you have will affect your saving habits. Older people tend to save more because they are closer to retirement; younger people tend to spend more on items such as cars and clothes. Wealthier people tend to save more because they already have enough money; poorer people may not be able to afford saving at all. Central banks' interest rates policies also affect how much you save; higher interest rates encourage spending while lower interest rates encourage saving. Finally, access to credit affects how much you can borrow and thus how much you can spend on goods instead of saving it up for later use.

Why would someone want to save their income instead of spending all of it immediately ?

The main reason why people choose to save their income rather than spend all of it immediately is because they hope that by doing so they will be able to afford more things later on down the line .

What does "nest egg" mean?

A nest egg is an accumulation of money saved for future use.

What is savings?

Savings are assets that exist at any one time.

How does saving differ from investment?

Saving differs from investment in that it occurs over time, whereas investment is a stock variable.

How do you calculate your savings rate?

You can calculate your savings rate by subtracting expenditures from disposable income and dividing the result by disposable income. For example, if you have $3, left over after taxes (disposable income) and spend $24 in expenditures, then your savings are $3,. This would be expressed as 6,.

What does saving refer to?

Saving refers to the act of not spending money.

What can you do with your savings?

You can put money aside in various accounts, such as deposit accounts or pension accounts.