Saving For The Future: What We Can Learn From The Chinese

Saving for the future

“A penny saved is a penny earned.”

–          Clichéd but true.

There is an extremely strong case to be made philosophically for saving money. All the ancient wisdom the world over is geared toward emphasizing on saving for the rainy day which never announces its arrival. Because who knows what tomorrow may bring? Today is all we have, and this day is our best chance to take care of tomorrow.

See? Even a mere reference to the time-tested method of saving can’t be pulled off without devolving into platitudes.

And yet it is proving to be extremely difficult for people in this country to make any substantial savings for the sake of their own future. In this post we take a look at why that is and how to get around it. Furthermore, since there are countries on this very planet that are able to save impressive amounts of money year after year, it only makes sense to take a leaf or two out of their books and examine if their methods can help us too.

It is no secret that the Chinese are master savers. China’s national savings rate is extremely high, for a number of reasons – cultural, socio-economic, institutional, and governmental.

The big nations of the West, however, seem to be at the opposite end of the spectrum when it comes to saving. I’m only stating the obvious when I say that the Americans and the Chinese are culturally poles apart. Next to the Chinese an average American looks extremely wasteful, and next to us the average Chinese looks rather stingy.

But without being judgmental, if one is to go by the amount of money in the bank balance of an individual regardless of where they are from, it’s easy to see that those who save more are likely to be better off in the future than those who don’t.

So the first step for the Americans interested in improving their rate of saving is to bring about a change in their mindset.

They need to go from thinking that spending $$$ = cool, to saving $$$ = super cool.

How to do it?

1. Resist being easily manipulated by the media.

Buying an endless number of new shiny things is NOT the best use of your heard-earned cash. Yes, we need to keep spending in order to keep the economy moving but nobody said we needed to splurge on mindless purchases. Don’t let the advertisements tell you what you need and what you don’t. You be the judge of that. Keep non-essential stuff at a minimum, especially if you have a big family to support and loans to pay off.

 2. Distance yourself from the spending culture.

The institutions in China encourage their citizens to save, whereas the American ones encourage us to spend, spend, and spend.

While it is not desirable for the consumers of a free market economy to not loosen their purse strings at all, the problem with encouraging people to spend is that some of us do not realize that spending is just one part of the overall financial equation, the other parts being earning and saving. All three of them together keep your financial life in balance.

When the government asks you to spend, it is not meant to be taken as a license for you to be reckless. They assume you know what is and is not within your reach, and also the consequences of forgetting that.

3. Think solid numbers instead of wishy-washy goals

Your disposable income and the saving rate both need to be defined and set at a percentage.

To give you a suggestion, save 30% of your monthly income. Put half of that away in a long-term saving instrument and forget all about it. (Whether to choose stocks, bonds, or anything else for this purpose would be your decision and would depend on your goals and the risk appetite. Treasury bonds, however, are always a safe bet.)

On top of your fixed monthly costs like the rent, food, gas, commute bills, etc., give yourself 20% of your total monthly income to spend.

The rest should remain in your bank account. You need to stick to this month after month, year after year because savings aren’t built in a day.

4. Encourage your family members to save as well.

If you have spendthrift individuals in your household, you need to rein them in urgently. As important as personal saving is the concept of household saving. The Chinese on an annual basis achieve an average household saving of almost 25%. The Indians save even more — 32% of their disposable income. That’s an impressive rate and let that be your goal too.

Whether it should be 25% or 32% is up to you. You can choose to save only 20% of your disposable income each month, but whatever percentage you choose, stick to it and make sure you end up achieving it.

Keep in mind that expenditures wary from month to month and sometimes big expenses come calling out of nowhere. It is also safe to assume that you would achieve an actual saving rate merely in the region of your targeted saving rate. For example, if you aim to save 20% of your monthly disposable income, you may actually end up saving 15% of it. So keep the target figure high for you to keep your real savings high, too.

5. Save as per your family needs.

The Chinese have small families, which translates into fewer people to spend on per family, thus directly affecting their savings rates.

For bigger American families, at least when the children are growing up, a high savings rate may not be feasible. But soon as any of the children start earning, say around mid-teens, jack up your monthly saving goal.

 6. Get a purpose in life

Working long hours to earn your money and then spending most of it on things you absolutely do not need is NOT what you were put on this planet for.

For people to have a healthy attitude to money they need to find some purpose in life, or you will keep turning to food and online shopping to while your time away and to make yourself feel good about a persistent emptiness in life.

A purpose, on the other hand, will give you something to look forward to and take your focus away from the ‘spending mode’ that seems to be the default setting for most of us.

 7. Think of saving as the best defense for yourself.

There is a “precautionary motive” to the high rate savings found in certain eastern countries. In both India and China, their respective governments do not sort their citizens out in terms of healthcare, housing, or education.

Besides, in developing countries inflation has the habit of going in only one direction – upward.

People who have lived in these fast developing countries for any considerable time, have seen their surroundings and economic realities change stupendously and in a very short time.

When your reality changes beyond measure and all you see are rising costs and government structures you cannot rely on, saving as much as you can is the best defense against an uncertain future.

Author Bio: 

Tracy is a Community Manager at The Hartford, which offers sustainable multifaceted financial services, including fidelity bonds. She’s @TracyVides on Twitter.


  1. Great post! Thanks for reminding some very good thoughts of our life. Really love the last one. Once again thank you very much.

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