The OECD keeps track of a lot of statistics about a lot of countries.
One particularly interesting statistic is the Household Savings (% of total household disposable income).
Canada used to be a high saving nation with the average Canadian in 1982 saving 20% of their income.
But things have changed. In 2005, that impressive savings rate dwindled down to a mear 1.5% but has since risen to 5% in 2015.
China is the king of saving. The average Chinese in 1992 saved 34% of their income with that number rising in 2014 to 38%, never dipping below 27% in the years between.
At Canada's lowest in 2005, the Chinese were saving more than 20x more than Canadian.
What are the Chinese doing differently?
Canadians often complain that the Chinese are buying all the real estate and pushing real estate prices through the roof.
While statistics show that Chinese buyers make up only about 1% of real estate purchases, many of these buyers are not reselling these properties on the market and many are not even renting these properties. This real estate supply is, for now, being taken off the market indefinitely, lowering the supply, which is likely driving prices higher even as domestic demand remains constant.
But the question we want to investigate is how can these Chinese buyers afford to swoop into real estate markets like Canada? I'm not going to get into the legality of it. The simple answer that drives down to the core is that "they save ruthlessly". Saving more than a 3rd of what they make.
When you live 33% below your means, year after year after year, as the Chinese have proven to do for at least the last 23 years (according to the OECD), you end up saving a lot of money. Investing that money properly over 23 years will give you even more profound results.
Using the savings rate from 1992 to 2014 (the full data available for China and Canada), if you had a Chinese person making $30,000 and a Canadian making $30,000 and both saved the average of the country, without any growth the Canadian would have saved $36,221 and the Chinese would have saved $229,903 over the 23 year period.
With a 6% annual rate of return over that time, The Canadian would have a nest egg of $86,702, while the Chinese would have $458,203.
This is the power of saving money. Even with the same rate of return, the Chinese person is able to accumulate over 5x more wealth because they consistently save more every year.
The Biggest Factor In Getting To Retirement
Early in your journey to retirement, the biggest factor in getting to retirement is not your rate of return.
Imagine you have $10,000, a 1% higher rate of return is only $100. At this point in your life, saving $100 is easier than getting 1% higher rate of return.
You could save $1,000 more a year and that would be worth 10% higher rate of return.
You could save $10,000 more a year an that would be worth 100% higher rate of return.
Try asking your financial advisor to get you 10% or 100% more return and see what they say. It's not easy, you will need to take an extremely high level of risk where you could end up losing all your money. Or you can take the easy route and just save it like the Chinese.
Save Money Retire Early is written by Jon Lo, a barely 30 something change optimist, and personal finance guy. I believe anyone can be rich or poor, it's what you save that makes the difference.