The Federal Government actually keeps track of how much Americans save every month. They define it as “personal saving as a percentage of disposable personal income.”
It was 3.2 percent in May, and that was the highest rate reported in 2013 in the United States.
Fluctuations in savings often reflect larger economic trends and of cultural norms. So we’re taking a trip around the world to check out how people save in other countries.
Marketplace’s Stephen Beard in London, says that savings in England is a tale of two different eras, “There is what people did before the crisis, and what they’ve done since. Before, what they went absolutely crazy. They went on a spending binge, household debt soared … the savings rate fell,” says Beard.
The primary cause of increased spending? Home prices, according to Beard. “The biggest driver was houses, you can’t really blame the Brits, this wasn’t really fecklessness, house prices just spiraled out of control.”
Now that the financial crisis has mostly settled, you might expect savings to rebound, but that hasn’t been the case.”You’d think that people would start saving a lot more because they were sweating their jobs, but actually they’ve been saving even less as a nation since 2009,” Beard says.
“They have to some extent been paying down their debt. Most crucially, the British government and The Bank of England have declared a war on saving. They have punished the savers. They have driven down interest rates. You get after tax, [only] 0.3 or 0.1 percent [interest] on a savings account.”
One thing the UK does have is a more robust safety net. Healthcare insurance is universal, for example, and Beard says that can have a big impact on how people save. “I think it does hold down the savings rate, the Brits aren’t saving anything like enough for retirement, and public spending is coming under huge pressure,” Beard says. “The government has to borrow $200 billion a year, and this is a much smaller economy than the U.S economy.”
China is the country with the highest savings rate, and according to Marketplace’s China correspondent Rob Schmitz, most people in China put away half of their salary into savings.
A big reason people in China save much more is because of the health-care system, according to Schmitz. “China does have a ‘universal’ health-care system that covers everyone. and it’s great if you catch a cold and you need someone to take your temperature. But it doesn’t cover the very things you want health insurance to cover, which are the most specialized and expensive medical procedures,” Schmitz. says. “Let’s say you’re riding your bike to work and you get hit by a car, and you require surgery. China’s state health-insurance program isn’t going to cover much of that. If you make an average middle-class salary in China, you’ll probably have to fork out half a year’s salary for surgery and rehab.”
“Most hospitals will demand money up-front before they even touch you,” according to Schmitz. That’s a pretty strong incentive to save.
But saving too much can be a problem too. If everyone’s saving, then no one is spending, and if no one is spending, then companies can start to falter. “China’s new leadership under Xi Jinping understands that the old economic growth formula, building roads high speed rail and luxury condos has created a lot of waste, and in order to build a healthier more balanced economy, it needs to get people to spend.”
Brazil is in the midst of protests over health-care, education, and rising transportation costs, but it’s also seen a dramatic rise in its middle-class. And people are seeing a rise in their income.
Julia Dias Carniero is a reporter with the BBC in Brazil, and she says the extra money has gone towards spending.
Why isn’t there a culture of saving in Brazil? Carniero says it has a lot to do with the history of Brazil.
“In the 70’s and 80’s [during] the period of the military dictatorship, there was hyper-inflation, people had to spend their money as fast as possible because things were devalued very quickly,” Carniero says. “In the early 90’s, one of [then-President Fernando Collor’s] economic plans was to freeze people savings for a certain period of time. One day to the other people wouldn’t have acess to their savings, it didn’t really contribute for people to believe in that institution.”
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