How Do the Chinese Save 45% of Their Money – And Why Do Americans Save Only 3%?
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G. Brian Davis
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Maria Concepcion
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As of the second quarter of 2024, the average personal savings rate in the US is a paltry 3.6%, according to the Federal Reserve.
But Youtuber Humphrey Yang points to a shocking savings disparity in China, whose average savings rate is 45.9%.
Why do Chinese workers save at more than ten times the rate that Americans do? More importantly, how do they do it, and how can you boost your savings rate?
How the Chinese Save So Much
Yang points to four ways the average Chinese consumer maintains a high savings rate.
First, the typical Chinese consumer doesn’t indulge in luxury goods. Rather than flashing status symbols, they want to appear humble to their friends, family, and neighbors. According to Yang, most want to “fly under the radar” — an understandable impulse in a totalitarian country.
Second, many Chinese who grew up in poverty practice the “10:1 Rule,” aiming to spend just one yuan for every ten they earn. In other words, they aim for a 90% savings rate. Yang acknowledges that even the most disciplined Chinese workers struggle to achieve a 90% savings rate, but it sets an ambitious goal for personal savings.
It also lays the foundation for a scarcity mindset, but that’s a challenge higher up the socio-economic ladder. In poverty, a scarcity mindset can help you save the needed cash to invest in education or other necessities to improve your earning potential.
Third, Yang observes that most Chinese people focus on needs over wants. When they do splurge on wants, they look for the best value over the long term. In other words, they aim to be frugal rather than cheap.
Finally, many Chinese people prepare nearly all their meals at home, and only go out to eat for special occasions. That alone can save huge sums each month.
Learn More: 5 Unnecessary Bills You Should Stop Paying in 2024
Why Do the Chinese Save So Much More?
Understanding why the average Chinese saves at more than ten times the rate of the average American requires some cultural context.
On the simplest level, Yang points out that many Chinese consumers have an aversion to financing. They hate debt and prefer to pay in cash — which requires only spending money you have already saved.
Yang also notes that many Chinese citizens don’t trust that the state pension system will actually pay them what they promised in retirement. So, they squirrel away more of their own money to hedge against poverty in retirement.
At a tactical level, most Chinese also follow a zero-based budgeting system. They track where every yuan goes each month, and prioritize savings as the first “expense.”
Some cultural and demographic differences enter the calculus as well. China’s one-child policy led to a shortage of girls, and at one point, 122 male babies were born for every 100 girls. Those babies grew up to become adults who want to make their babies, and Yang says that young Chinese men have tried to stand out from the pack by saving more to accrue wealth.
Yang also notes that Chinese culture views saving money as honorable. Children given red envelopes with money on New Year’s or birthdays are encouraged to save much of it. The culture views wealthier people as successful rather than with the antagonism and anger often seen in the United States.
Don’t expect those cultural differences to take root Stateside any time soon, but we can all crib a few notes from the Chinese playbook to save more and secure our financial futures.
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