British savers and investors have a lot to learn from their Chinese counterparts.
When it comes to saving and investing for a brighter future, we Brits are light years behind many of our overseas cousins.
China's serious savers
For proof, take a look at the following table, compiled using data from Lloyds TSB's latest survey into savings levels in three leading economies:
| Country | Proportion of
income saved |
|---|
| China | 47% |
| Germany | 10% |
| UK | 7% |
The table shows the proportion of disposable income saved, on average, by the citizens of each country. As you can see, we Brits save an average of 7% of our disposable income each year, whereas German savers salt away a tenth (10%) of their spare cash.
However, when it comes to saving, the Chinese lead the world, with a truly astonishing savings ratio of 47%. In other words, the citizens of the Middle Kingdom presently set aside nearly half of their take-home earnings. This ratio has risen steeply in the past decade; in 2001, it was 27%.
What's more, while modern Brits have largely forgotten how to save, this habit is deeply ingrained in Chinese culture. While one in nine Brits (11%) has no savings at all, a mere one in 30 (3%) Chinese adults has no savings, investments or pensions.
In addition, share ownership has become very widespread in of this new era of Chinese capitalism. Roughly three in five Chinese adults own shares, unit trusts and other collective investments -- a much higher proportion than in the UK or Germany.
Britain falls far behind
Of course, the incredibly high level of personal savings in China reflects an almost total lack of social security and welfare benefits in that fast-growing nation. With little or no state benefits and pensions to fall back on, Chinese workers know that, when times turn tough, they can rely only on themselves and their own safety nets.
Even so, there is a staggeringly wide gap between the size of British and Chinese savings pots. Here in the UK, a typical household has just over £5,000 in savings and investments. In Germany, this figure is roughly £8,600 per family unit. In China, the typical savings pot is over £19,300, which is almost four times the UK figure.
Furthermore, the huge income gap between the UK and China further demonstrates that the Chinese are the world's most successful savers.
Here in the UK, GDP (gross domestic product, or total national output) per person neared $36,000 in 2011. According to the International Monetary Fund, the UK has the 22nd-highest GDP per capita in the world. In China, GDP per head was under $8,400 last year, putting the People's Republic in 90th place.
Alas, recent trends suggest that the UK's savings gap is widening. In the past year, the average savings pot has shrunk by around £600, which is a decline of a ninth (11%). Meanwhile, in China, the average savings pot grew in size by 7% in the past 12 months.
How much do you save and invest?
Clearly, the UK's savings pots are too small and our savings ratio is pitifully low. Indeed, for those aiming to be rich or even comfortably well-off in the future, saving around 5% to 10% of disposable income simply isn't enough.
For the record, I consider even a savings ratio of 10% of take-home pay to be merely an 'entry-level' commitment to a brighter financial future. Since the late Nineties, I have been saving between 25% and 75% of my after-tax earnings into stocks and shares. In fact, in some years, I have paid 100% of my before-tax salary into a pension, in order to grab the maximum tax relief possible.
Finally, here at the Fool, we are very interested to find out what proportion of their incomes our readers save and invest. Please let us know in the comments box below!
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