Personal Saving's Rate
In the personal finance space you will find plenty of references to the growth and complete domination of the consumerism mentality in the United States since the postwar period. One key factor that is regularly referenced in the consumer spending discussion is the "Personal Savings Rate."
Borrowing this definition from Trading Economics,
Personal Saving's Rate Defined
"In the United States, Personal Saving Rate correspond to the ratio of personal income saved to personal net disposable income during a certain period of time.." So this is how much people save relative to their income after taxes.
Saving money into accounts for retirement, real estate investments, emergencies, future expenses such as college is what helps build net your net worth. Simply put, higher saving's rates will accelerate the growth of your net worth. Conversely, lower saving's rates will limit your ability to grow your net worth. What's most interesting about the personal saving's rate is the varying rate from country to country, with one key stellar savings performer completely running away with a win.
Sitting below average
In the United States, the personal saving's rate typically sits at around 8 percent, with the July 2019 rate of 7.7 percent.
-----Saving's Rate by Country-----
Euro Area 12.6
South Africa -0.1
South Korea 34.6
United Kingdom 4.4
United States 7.7
Given the higher salaries, strong free market and legal protections that enable business growth in the U.S., you would expect this U.S. rate to be very high. However, the 8% average personal saving's rate in the U.S. is very low compared to other countries.
Other country's above average saving's rate
Several key outliers are Japan, South Korea and China, each with a mid-30's percent savings rate, more than 4 times that of the U.S. Mexico also maintains a higher rate of 21%. The average personal saving's rate for these thirteen listed countries is right at around 13%, so again the U.S. sits five percentage points below the average.
Where do you sit
So, now that you know that the U.S. sits at a below average mark for personal saving's rates. I recommend looking at your own personal saving's rate. Are you sitting in the middle of the average at 13%, or are you managing your expenses and creating 30% plus savings opportunity similar to China, Japan and South Korea?
I often hear financial guru's talk about the need for a 10% saving's rate. Following that advice will put you in a below average group relative to non-U.S. countries. Why not aim for 15%, 20%, or even the stellar 35% and above saving's rate. What is stopping you from achieving this level of higher savings? If you can figure out what is limiting your saving's rate growth you will have a much better chance to increase your own personal saving's rate.
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Note that I am not a financial or legal professional, nor am I licensed to sell securities, or any other financial instruments. Given this statement, I strongly recommend that you consider this blog as entertainment value. Although, I sincerely hope that I can motivate you to learn to build your own financial knowledge and wealth.
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