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Wednesday 26 October 2011

Household Savings Rate

Earlier this month I had stated my intent of saving 85% of our family take home income.  I am still unsure if I can achieve this aggressive savings rate, but I am pretty sure that over the last few months, our savings rate should be around the 50%-60% levels.  This got me wondering as to what the average household savings rate is across India/World.  So I went searching for this data, and here is what I dug up from GFMAG.

I have reproduced the following table from the above site here for convenience. 

The shocking statistic for me was that across the world over 2decades of time the annual average household savings rate maxes out at 20%, with the most common savings rate being in the mid to high single digits.  Now of course the need to save could be different in different countries.  Typically countries that have a higher proportion of social security, should have lower savings rate since there is less of a drive to save for a household, as the government is expected to provide support post retirement. 

Though countries like India and China are not listed in this survey, I would assume we would naturally have a much higher savings rate since our government does not provide any kind of social security whatsoever. 

In any case, the fact that the average savings rate is much below my 85% target, gives me a lot of confidence.  On average, people do not retire early, and continue to work into their late 60s.  For me to be able to retire in my 40s, I need to be doing something that is not the average, and I hope my aggressive savings rate will make the difference when compared to the average joe.

3 comments:

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  3. Wow, saving 50-60% with target of 85% is really great. Could you also give info in which kind of products are you putting you money (PPF, RD, FD, Mutual Funds, ULIPs etc.)?
    Also, could you also please share what kind of techniques you are using to save?
    Thanks in advance.

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