# What is your Savings Rate?



## kaleb0 (Apr 26, 2011)

I recently read an article about how the Chinese middle class is saving an average of 52% of their income.
I then found this graph: http://www.gfmag.com/tools/global-d...396-household-saving-rates.html#axzz26kRuq0Nt
Scrolling ahead to 2011 shows Canada's average household savings rate at about 3.1%

I'd consider myself incredibly frugal, and was curious how I might match up. I was impressed to calculate that my percentage of employment income going into savings or investments is 54.3% so far this year. I suspect this puts me at the high end.

How do you guys stack up?


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## Spudd (Oct 11, 2011)

Net income or gross income?


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## MoneyGal (Apr 24, 2009)

Is paying down my mortgage at an accelerated rate "savings"?


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## Four Pillars (Apr 5, 2009)

MoneyGal said:


> Is paying down my mortgage at an accelerated rate "savings"?


Yup.


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## GOB (Feb 15, 2011)

I'm well over 50% right now but a realistic sustainable target for me is 35%-50%. I'm trying to leverage my savings into high return investments to set up a good base for the future and so far it's working well.


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## Quotealex (Aug 1, 2010)

Is the Chinese middle class as taxed as us?


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## crazyjackcsa (Aug 8, 2010)

Is this long-term, "forever" savings. ie, for retirement? If I'm saving $200 a month for a new car in 5 years, is that savings (even though I plan on spending it)? If I'm saving $100 a month for home repairs that I will someday need, is that savings? If I'm saving $200 a month for a holiday every summer, is that savings?

So, on any given year, I'm at 17%. With that in mind, I needed a new roof, a new car and paid for a planned vacation within 3 weeks of each other this year. That would actually put this year's savings rate at about -21% annually for 2012.


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## Guigz (Oct 28, 2010)

Right around 2/3 of our net pay, not including DB contributions.


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## andrewf (Mar 1, 2010)

Mine is generally ~50% of net income. I think it's important to take this with a grain of salt. Your balance sheet has financial assets and liabilities, but you also need to account for human capital. 'Saving' generally means converting human capital into financial capital.


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## Sampson (Apr 3, 2009)

andrewf said:


> I think it's important to take this with a grain of salt.


Absolutely.

Someone saving 50% of $1,000,000 vs. someone saving 50% of $40,000 mean very different things. Someone without a home, dependents or other 'liabilities' also should expect different meaning to the rates. And lastly, the human capital thingy.


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## MoneyGal (Apr 24, 2009)

andrewf said:


> Mine is generally ~50% of net income. I think it's important to take this with a grain of salt. Your balance sheet has financial assets and liabilities, but you also need to account for human capital. 'Saving' generally means converting human capital into financial capital.


No, converting human capital into financial capital is converting human capital into financial capital. "Saving" means opening up a bank account or investment account and putting some of that converted human capital in there, and leaving it in there. :02.47-tranquillity:


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## Square Root (Jan 30, 2010)

in my case 0% Fully retired so why would I save? In fact at some point I'm going to have to spend some capital.


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## marina628 (Dec 14, 2010)

I am on a tight budget until 2017 ,saving about 50% including the mortgage pay downs.I set some goals for myself by the time I hit 50 and really sticking to them.In October though I will save 9% as we are going to Las Vegas for 8 days for our 24th Anniversary.


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## peekstar (Oct 2, 2012)

I'm not sure how to calculate my savings rate exactly. These are my stats, can you tell me if I'm on-track or if I'm too spendy:

Net income: $4880

Spending (fixed and discretionary): $1280

Student Loan Payment: $2000 (student loan interest charge is ~$45)

Leftover: $1600

All on a per month basis.

Other particulars: no mortgage, car or other large loans. No rent (live with parents for time being).


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## PF_Enthusiast (Jan 21, 2011)

I'm savings between 25-30% of gross income. This includes additional payments on top of the regular debt payments (mortgage). I think the vast majority of CMFers are doing much better than the average Canadian.


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## andrewf (Mar 1, 2010)

peekstar, I think you're doing just fine. Student loan repayment is a form of savings.


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## cjk2 (Sep 19, 2012)

I'm trying to aim for at least 50% of my net income. I figure it's easiest to do it now when I only have to pay for myself (vs. further down the road when I'll have a mortgage, family, kids, etc). Some months I can actually get as high as 70%, but then there are the other months with big expenses where I can only save 40%. So far my average this year is just under 60% (although in the first half this "savings" all went towards my student loan).

However, I'm thinking of moving to a nicer place soon which means my rent is going to go up, so that 60% probably isn't sustainable for much longer. Hopefully I'll still be able to manage 50% though. (I also constantly have the urge to upgrade to a nicer car, but so far the more money-conscious side of me has managed to win out and stop me from actually wasting my money! Fingers crossed that this keep up. :biggrin


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## My Own Advisor (Sep 24, 2012)

Over 20% for me, if you include mortgage prepayments. Ugh, only 9 more years to go for that sucker....


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## Square Root (Jan 30, 2010)

So, we have a range of responses. Some are saving a lot, those who aren't didn't respond. Is there any conclusion we can make? Otherwise, not sure the point of the poll?


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## Causalien (Apr 4, 2009)

What constitute savings? If it's the # in the checking + savings account. I have < 0.01% of my income going into savings.

I didn't respond because the definition isn't complete.


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## Jon_Snow (May 20, 2009)

Factoring in our net monthly income minus expenses, we are saving about 70%.... If we add our dividends to our income, we are at about 75%.

We certainly could be having more "fun" in life, but it is nice to be able to grow ones net worth quickly without relying on the markets.


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## CanadianCapitalist (Mar 31, 2009)

It's just astonishing that close to half the members voting so far have a savings rate of 50% or more!


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## Square Root (Jan 30, 2010)

CanadianCapitalist said:


> It's just astonishing that close to half the members voting so far have a savings rate of 50% or more!


Yes, clearly not a representative nor verifiable sample.


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## steve41 (Apr 18, 2009)

Did you factor out the retirees? If not, that would make it even more suspicious.


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## HaroldCrump (Jun 10, 2009)

CanadianCapitalist said:


> It's just astonishing that close to half the members voting so far have a savings rate of 50% or more!


This is a classic case of survivor bias


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## Kail (Feb 7, 2012)

11% of my salary goes straight into my RRSPs every pay. It doesn't feel like nearly enough though. I'd like to start contributing to a TSFA as well but the thought of putting another 5 or 10% into that scares me. It shouldn't, I know I would be fine but still.


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## steve41 (Apr 18, 2009)

On reflection, this 50% figure makes more sense. The savings rate of those 40 or less is very low.... they are paying down mortgages and student debt, acquiring toys, and raising kids. Finally, they are in mid life.... kids gone, house paid off, and salary finally getting respectable. Plus, they have the spare time to spend on CMF. This is the time when we finally get serious (obsess, even) about savings.


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## Square Root (Jan 30, 2010)

That could be Steve, but if they calculated it right, paying down the mortgage and other debt would count as savings. I think it is more likely to be the case that it's just the people who are proud of, or happy with, their savings rate that respond. Pretty similar to a discussion of investment returns.


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## GoldStone (Mar 6, 2011)

HaroldCrump said:


> This is a classic case of survivor bias


I think it's a classic case of a SLOP-py poll.

SLOP = self-selecting opinion poll.

SLOPs suffer from self-selection bias. It's a different concept than survivorship bias.

Compare

http://en.wikipedia.org/wiki/Self-selection_bias

vs.

http://en.wikipedia.org/wiki/Survivorship_bias


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## MoneyGal (Apr 24, 2009)

Yeah; who is going to come in here and say, "I pretty much save nothing. That's right, I live paycheque-to-paycheque!"


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## andrewf (Mar 1, 2010)

Or, "I use my house as an ATM: my savings rate is -25%. Look for me on an upcoming episode to 'Til Debt Do Us Part'!"


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## realist (Apr 8, 2011)

I'm at around 50-60% right now, but that's about 90% down payment for a house savings, 5% savings for trips, 5% for retirement, give or take.


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## Sampson (Apr 3, 2009)

Our savings rate has dropped to minimal amounts (certainly under 10%). That's the truth. 2nd mat leave started, so until the honey starts bringing home the bacon again, we're going to have to get by on my scraps.

We still plan on maxing out contributions to all registered accounts however, by transferring non-registered holdings.


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## MoneyGal (Apr 24, 2009)

Sampson said:


> Our savings rate has dropped to minimal amounts (certainly under 10%). That's the truth. 2nd mat leave started, so until the honey starts bringing home the bacon again, we're going to have to get by on my scraps.
> 
> We still plan on maxing out contributions to all registered accounts however, by transferring non-registered holdings.


Consumption smoothing all the way!


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## Spudd (Oct 11, 2011)

I haven't got any real clue what my saving rate is. 
1. 5% of my salary goes into company stock, this is matched 50% by the company so it ends up being 7.5% of my salary
2. Company contributes about 10% of my net salary to RRSP's for me. 
3. Overpay the mortgage by about 10% of my salary per month on average.
4. 5% of my salary goes to the TFSA. 

So I guess that's about 30% of my salary gets saved, but 12.5% is done by my company as perks and not done by me, so does it count? Additionally, sometimes I have a few extra bucks and I chuck them into my non-registered investment account or a savings account or the mortgage, but it's totally variable and impossible to estimate an average.


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## Homerhomer (Oct 18, 2010)

MoneyGal said:


> Is paying down my mortgage at an accelerated rate "savings"?


If that is savings than shouldn't paying down the principle on regular payments be savings as well?

Most of my savings will be spend before retirement so I don't count it as savings, I was saving to buy nicer house, now that this happened I save for other things, emergencies, furniture, roof that will need to be replaced, vacation.

The actual retirement saving is 10% of my gross.


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## Sampson (Apr 3, 2009)

MoneyGal said:


> Consumption smoothing all the way!


We actually compensate by pre-saving. So we will probably maintain exactly the same consumption, but due to great savings rates (+50% like other CMFers) leading up to the life events, we don't need to save now.


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## steve41 (Apr 18, 2009)

OK..... I built a 28 year old starting fresh with a 65K gross salary indexed going forward at 3%, retiring at 65. He has a new 200K mortgage, 4%, 25 year. 

Based on a level net income, 'die broke at 95' plan, 4% market, 2% inflation.... his savings rate is effectively zero for 8 years, then, starting at 4%, it grows to 21% at age 52 when his mortgage is paid off, jumps to 30%, growing to 35% at 65 when he retires.

Not scientific, nor representative, but an interesting study nonetheless.


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## MoneyGal (Apr 24, 2009)

Sampson said:


> We actually compensate by pre-saving. So we will probably maintain exactly the same consumption, but due to great savings rates (+50% like other CMFers) leading up to the life events, we don't need to save now.


You are saying the same thing as me! This is the definition of consumption smoothing (it isn't "savings smoothing").


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## Jon_Snow (May 20, 2009)

Seems to be a bit of skepticism regarding the unusually high savings rates posted on this thread.

In our case, 9200 coming in, 2300 going out... That's how we do it. Granted, some months we spend more.


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## MoneyGal (Apr 24, 2009)

No skepticism from me! My point was that people who do NOT have a high savings rate are very unlikely to post in this thread, for fear of a bunch of finger-wagging. :disturbed::boxing:


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## GoldStone (Mar 6, 2011)

People who do NOT have a high savings rate are unlikely to register as CMF members. That's where real self-selection happens.


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## Sampson (Apr 3, 2009)

I always thought consumption smoothing meant changing consumption in response to reduced income.


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## MoneyGal (Apr 24, 2009)

Nope. It means keeping your consumption "smooth" over your lifetime. This typically means borrowing early on, then paying back debt as you earn more money, then saving a large fraction of your earnings as you move through your career. Read this handy-dandy Wikipedia entry - with bonus Milton Friedman references! http://en.wikipedia.org/wiki/Consumption_smoothing


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## Four Pillars (Apr 5, 2009)

There is never a shortage of people who love to brag about their success at something and get a chance to lord it over other less disciplined mortals. I happen to be one of them. 

I suspect that people with very high savings rates are also among the very few people who actually take the time to figure out what that rate is. 

I've had a decent savings rate over the last few years, probably 30%? but it has crashed since paying off my mortgage. #humblebrag 

It's all relative. A high savings rate could result from someone who waited too long to save for retirement and is now desperately trying to catch up. 

It could be someone who is deep in debt and spends a ridiculous amount of their cash paying down that debt.

It could be from someone who wants early retirement and saves most of their income to make that happen.

And it could be that person who is just crazy and saves too much because they can't do anything else. They live in a hole or on the street and when they die, they get mentioned in the news because they have millions in the bank.

Bottom line is that your savings rate should match your goals. If you have crazy goals - you probably have a crazy savings rate.


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## steve41 (Apr 18, 2009)

MoneyGal said:


> Nope. It means keeping your consumption "smooth" over your lifetime. This typically means borrowing early on, then paying back debt as you earn more money, then saving a large fraction of your earnings as you move through your career.


This is exactly the RRIFmetic paradigm. I term it "Smoothing", but it is the same thing.... keeping a level after tax income. The size of your shopping cart should stay constant year over year irrespective of loan pmts, fluctuating paychecks, insurance premiums, income taxes, etc. Money is flowed into and out of your savings in order to maintain that same level basket of groceries. It is a tricky calculation, especially if you track income tax accurately and not approximate it with an average/marginal tax rate.


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## andrewf (Mar 1, 2010)

Not necessarily. Some years you will consume more than others, say, when you have your first child.


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## steve41 (Apr 18, 2009)

andrewf said:


> Not necessarily. Some years you will consume more than others, say, when you have your first child.


 When I say a level after-tax income, I should have qualified it as a 'contoured' after tax income. Special events, a new car purchase every 5 years, a post retirement consumption dip.... these are all realities, and factor into the calculation, along with windfall expectations such as selling the cottage in ten years, an inheritance, etc.


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## Guigz (Oct 28, 2010)

Four Pillars said:


> It could be from someone who wants early retirement and saves most of their income to make that happen.


Bingo! 70%+ saving rate for the win. With each year of work, I put away 2.33 years of living expenses.


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## Sampson (Apr 3, 2009)

andrewf said:


> say, when you have your first child.


2nd


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## mind_business (Sep 24, 2011)

Guigz said:


> Bingo! 70%+ saving rate for the win. With each year of work, I put away 2.33 years of living expenses.


I've budgetted a forced savings rate of 35% of gross income. However, since I've budgetted some large values for unexpected home expenses, I'm closer to a 45% savings rate. Being a single income household, that's the best we can do at my current wage. Like you, our end goal is to be financially able to retire early (55) if I/we choose to, or need to. 

Even though this is a financial forum, I'm a bit surprised such a high percentage of people are able to save 50% or more of their gross income. 70% is amazing!!! Well done people!!!


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## steve41 (Apr 18, 2009)

Guigz said:


> Bingo! 70%+ saving rate for the win. With each year of work, I put away 2.33 years of living expenses.


 Goodie!.... A world replete with Derek Foster clones. I can hardly wait.


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## Jon_Snow (May 20, 2009)

Guigz said:


> Bingo! 70%+ saving rate for the win. With each year of work, I put away 2.33 years of living expenses.


It's a lonely path we take Guigz, but it will be worth it. See you on the other side.


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## MoneyGal (Apr 24, 2009)

andrewf said:


> Not necessarily. Some years you will consume more than others, say, when you have your first child.


:distant: What are you responding to?


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## brad (May 22, 2009)

What a bunch of slackers! I save 125% of my income every year by gradually selling off everything I own and socking it all into savings, while living on ants, crickets, and strawberries gleaned from neighbours' gardens and stone walls. ;-)


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## Jon_Snow (May 20, 2009)

I chuckled out loud (COL?) over that one. Thanks Brad.


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## Sampson (Apr 3, 2009)

I think Mike just called all CMFers fricken crazy.


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## MoneyGal (Apr 24, 2009)

You say that like it's a bad thing.


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## andrewf (Mar 1, 2010)

MoneyGal said:


> :distant: What are you responding to?


This:


steve41 said:


> This is exactly the RRIFmetic paradigm. I term it "Smoothing", but it is the same thing.... keeping a level after tax income. The size of your shopping cart should stay constant year over year irrespective of loan pmts, fluctuating paychecks, insurance premiums, income taxes, etc. Money is flowed into and out of your savings in order to maintain that same level basket of groceries. It is a tricky calculation, especially if you track income tax accurately and not approximate it with an average/marginal tax rate.


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## mrPPincer (Nov 21, 2011)

25-30% of gross income but I'm semi-retired early and living very frugally.
(Like brad I like to bulk up on ants and twigs and leaves when they're in season as a cost-saving measure ;-)
New savings only amount to less than 3% of my modest portfolio per year.


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## Dibs (May 26, 2011)

It is self-selection on two occasions, first for those who join this forum, and second for those who choose to respond to the poll. 

So far this year I have saved 54% of my income. Note that I have no debt, free food, and 150$/month rent (still living with the parents).


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## MoneyGal (Apr 24, 2009)

Geez. By those standards, my kids have a ridiculously high savings rate.


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## longinvest (Sep 12, 2012)

Our savings rate is 60+% of the money we bring home (net income after all deductions). Having a paid mortgage helps.


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## getchanceandluck (Jul 5, 2012)

Before school I was saving around 50-60%. Now I'm probably down to 5-10% but I'll be back....in 2017 :cower:


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