A good question

How is it that citizens in so many other countries with lower incomes and higher taxes have substantially higher savings rates – double, triple or more times the U.S. rate?

7 comments

  1. Insufficient data. You’re talking averages again. Savings rates vary by income levels. For each country, you would need to know the savings rate at each income level. May be comparing average (mean) to median income levels would help. Maybe not so much.

    https://i2.wp.com/financialsamurai.com/wp-content/uploads/2014/06/savings-rates-by-wealth-class.png?fit=1456,9999

    The dotted line shows the often quoted 4% figure, which is made up of the bottom 90% of income earners. The top 10% to top 1% of income earners save roughly 12%, which I find surprisingly low. It’s only the top 1% who saves an impressive figure at roughly 38%.

    The U.S. , we know has greater income disparity, greater wealth disparity, AND a higher poverty rate than almost every OECD country.

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    1. Yes, averages. Your point? The fact remains on average in other countries citizens on average are more efficient with their money and do with less that would be unacceptable to most Americans and needs less to say there are always exceptions.

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      1. We are different in so many ways. U.S. poverty rate* is 17.8 percent. Denmark is 5.5 percent. OECD average is about 11 percent.

        One might assume that a higher poverty rate would result in a lower overall savings rate.

        Caveat; However, two countries with the same poverty rates may differ in terms of the relative income-level of the poor.

        *taken as half the median household income of the total population.
        ……………

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      2. That depends. Poverty rates sometimes include the value of social programs. The US IS NOT 17% when you do that.

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      3. HARRY Truman famously asked to be sent a one-armed economist, having tired of exponents of the dismal science proclaiming “On the one hand, this” and “On the other hand, that”…

        Just a quick check, Denmark may be a poor example because according to the first study I found, savings rates (average) are lower than the U.S.

        (probably)”…due to high indebtedness, and probably also due to the higher levels of social protection and pension savings in Denmark, which reduce the need for precautionary savings.”

        According to the charts in the article, savings rates of the bottom fifty percent income group are about the same as the bottom fifty percent in the U.S. Rates at the upper income levels seem to be much higher. If you want to over think it, they also have savings data by age group.

        https://www.google.com/url?q=https://www.nationalbanken.dk/en/publications/Documents/2022/09/EM%2520-%2520Inequality%2520and%2520savings%2520memo.pdf&sa=U&ved=2ahUKEwiDotvUlLv-AhUZC0QIHdmSDBAQFnoECAMQAw&usg=AOvVaw3OqL5omP_fwALGc2dkUpsG

        On the other hand…

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  2. I would suggest you look at some of those countries financing laws. For example, mortgages are way different in Sweden and Canada requiring higher down payments and are often not fixed to 30 years, some as little as 5 year and then gets renewed at a new interest rate. This may require more savings to buy a house. In the US you can get a FHA mortgage with as little as 3% down.

    I don’t know about car loan and other financial products that may or may not a difference is how people have to save to buy things.

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