Americans Are the Worst? 5 Countries That Beat the U.S. at Saving Money

piggy bank for saving money

Piggy bank | Source: iStock

Americans are notorious for their penchant for spending, not saving. A third of people in the United States are living paycheck to paycheck, according to a recent Pew Charitable Trusts survey, including 10% of people who earn more than $100,000 per year.

It wasn’t always this way. Through the early 1980s, Americans saved more than 10% of their pay, on average. But between the mid-80s and the mid-2000s, savings rates declined, hitting a low of 1.9% in 2005, according to Trading Economics. Stagnant incomes, changes in how people save for retirement, and an increase in mortgage debt have all been blamed for the falloff in savings. Savings rates have rebounded since the financial crisis, but are still nowhere near what they were 40 or 50 years ago.

Low savings rates aren’t just an American problem, either. People in the U.S. saved 4.97% of their income in 2014, according to data from the Organization for Economic Cooperation and Development (OECD). (The OECD measures a country’s savings rate by subtracting average household spending from average disposable income, plus any change in the net equity of pension funds.) Our anemic savings rate is actually higher than in a lot of countries. In Spain, households saved 3.88% of their income, in New Zealand it was 2.10%, and in Italy, 2.97%.

Some countries even had a negative savings rate, including Latvia, Greece, Portugal, South Africa, and Denmark, and it’s not necessarily because they’re financially irresponsible. In Denmark, negative interest rates discourage savings and encourage borrowing. (Rather than paying interest on their mortgage, some Danish homeowners are actually getting money back from their lenders.) In Greece, a double-digit negative savings rate is a symptom of a broader economic crisis.

Yet other countries are beating the U.S. at the savings game, sometimes by a lot. Are those people just more frugal or better at managing their money than spendthrift Americans? Maybe, but a variety of factors, such as the existence of social welfare programs, government savings incentives, interest rates, and demographics can all affect a country’s overall savings rate. Still, it’s possible people in the U.S. could learn something from people in these five countries, where residents tend to save a greater percentage of their income than Americans.

1. South Korea

korean won

The banknotes of Korean won are displayed on a wall of a world money museum at KEB Hana bank in Seoul on June 9, 2016. | JUNG YEON-JE/AFP/Getty Images

The household savings rate in South Korea was 7.18% in 2014, up from 5.6% in 2013, and above the roughly 5% Americans save. But savings rates used to be much higher. Back in 1988, the average Korean household was saving one quarter of their income, according to Trading Economics, but the amount people saved fell significantly in the early 2000s. While savings rates have increased slightly in recent years, a rise in household debt has left Koreans with less money to put toward savings, according to The Economist, since almost 25% of the average middle-income family’s income now goes toward loan repayments.

2. Australia

At the turn of the millennium, Australians were saving just 2.33% of what they earned. By 2014, they were putting away a little more than 9% of their income for a rainy day, according to OECD data. Savings rates spiked in 2008 during the global financial crisis and have remained high since. The average Australian now saves $427 per month, according to a survey by Suncorp.

3. Sweden

Swedes saved 15.21% of their household income in 2014, even though a large share of their earnings – almost 60%, in some cases — goes to taxes. Like Denmark, interest rates in Sweden recently drifted into negative territory, and it’s possible that could encourage people to spend more and save less. However, some economists think negative interest rates actually make people save more, since they suggest there’s something wrong with the economy, according to a report in the Wall Street Journal. Swedes may actually end up increasing their savings, even though they may have to pay their bank for the privilege of stashing cash.

4. Switzerland

swiss bank

A UBS Bank location in Zurich | MICHAEL BUHOLZER/AFP/Getty Images

The Swiss saved an average of 19% of their household income in 2013, which isn’t surprising when you consider that incomes are higher in Switzerland and more people have full-time jobs than in other OECD countries. In fact, workers in Switzerland are paid more than anyone else in the world. But the country is also one of the most expensive to live in. Still, the Swiss manage to save a big chunk of their income despite a high cost of living.

5. China

In 2013, the household savings rate in China was an impressive 38.5%. Why are the Chinese so good at saving money? Rapid economic growth, a large population of working age people, and concern about the future all encourage people to bank a big chunk of their income, according to a report in Bloomberg. But the double-digit savings rates are a relatively new phenomenon. A few decades ago, the government provided most of the services people now need to pay for, and there was little incentive (or opportunity) to save large sums of money.

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