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There are many factors that affect savings habits such as disposable income, interest rates, age and lifestyle. Savings habits also appear to vary considerably across different countries and cultures. Statistics show that Asian countries tend to have stronger savings habits than western societies; expats in Asia could do well to learn from this.
The turn of the century saw a serious deterioration in western savings habits. Previous austerity habits were replaced by consumerism and consumption and as a result, borrowing rose to record high levels and savings declined. These increased levels of personal debt, unsupported by any significant savings, have now left many families poorly equipped to handle the current financial crisis.
Asian societies, on the other hand, have demonstrated an aversion towards debt with a culture far more geared towards saving. A recent article in the Japan Times by London School of Economics lecturer Keyu Jin highlighted a trend of disparity in savings habits between Asian and Western countries. In 1988, both the US and China were recorded as having equal household savings rates of around 5%. However, by 2007 the US had dropped to a mere 2.5% but China had rocketed up to a level around 30%. It is impossible to explain away such large differences using purely economic factors; a cultural bias towards better savings habits appears to be a definitive factor.
It is possible that western countries suffer from having a more developed credit market. Easily available credit has without doubt caused many people to fall on troubled times. Household borrowing, as a percentage of GDP, is quoted at 25% for Asia and a staggering 90% in western countries. However, to conclude that this is merely due to the differences in the availability of credit is too simplistic. There are savers and borrowers across all countries and both feel the effects of interest rate changes. However, it does seem that the reaction overall in Asian cultures is to increase savings to counter lower interest rates, whereas the reaction of western consumers is to borrow more.
There is a lot to be said for taking a leaf out the locals’ book and simply developing stronger savings habits and there are a number of options for expats in Asia to build up a considerable savings reserve. Expatriate status allows overseas nationals in Asia to take advantage of tax efficient international investments and a wide range of other financial solutions which allow them to get ahead.
If you are keen to build better savings habits into your financial planning, contact us at Infinity. Our professional advisers are here to advise on the best savings solutions for your own personal circumstances and are experienced at helping expats in Asia make the most of the savings opportunities available.