How to save like the Chinese

The Chinese save as much as 47% of their disposable income each month. Is it possible to follow their example?

According to a recent survey carried out by Lloyds TSB, UK families are saving, on average, 7% of their disposable income. Not bad, eh?

But now compare this to urban China, where they found households are saving a frankly incredible 47% of their disposable income! Blimey.

No State Pensions or Benefits

Now it’s important to realise that in China (and much of SE Asia) there is no “social safety net”, as State Pensions and benefits do not exist. If you can’t work, or wish to retire you’d better have a pretty healthy rainy day fund (or supportive family!) because families have to provide for themselves, financially.

This sobering fact certainly makes you better understand the reasoning behind their impressive ability to squirrel money away.

They save because they have to.

Chinese have nearly 4 times more in savings

The survey found that British households have, on average, around £5,000 in savings.

By comparison, the average Chinese household boasts nearly four times as much at over £19,000. Pretty impressive.

£102.15 per week

Does the presence of a national safety net make us too complacent? Are we relying on the State Pension too much?

There was a time when the State Pension provided a half decent retirement income, but times have changed. It’s currently a meagre £102.15 per week for a single or married person. That’s just £5,312 a year.

And yes, we may be able to boost this with Pension Credit and other benefits, but it is still means a paltry income in our golden years.

Save for retirement

The fact of the matter is, if we want to have a comfortable retirement (and by that I don’t mean luxurious, I just mean having enough money to pay all the bills and still have a little left over) we need to start planning for it now.

And that means thinking more like our Chinese friends and saving as much money as we can as soon as we can, be that in pensions, ISAs, investments or savings accounts.

But first things first – if you’re saddled with debts, you need to clear them before you can think about saving.

How can I save more?

So how are the Chinese managing to save so much? Well, the survey discovered that families take financial planning seriously, regularly checking the internet (or obtaining professional advice) to find financial products with the best rates.

But while 62% of British respondents claimed to be pro-active about switching providers, a whopping 82% of Chinese reckoned to have done so in the past.

So make sure you shop around for the best rates on your car insurance, your home insurance, your energy bills.

Spend less and make more

And there are plenty of other ways to hammer down those bills. Using vouchers when shopping or eating out, learning tricks to help you spend less at the supermarket and changing your lifestyle slightly can free up a fair bit of cash, too.

And why not increase your income by discovering how to make money?

Where should you save?

One of the best ways to establish where you can make savings is to make use of a budget. The lovemoney.com MoneyTrack tool can help you do just that. It aggregates all of your accounts into a single place, and categorises your spending. So you'll be able to see exactly where your money is going each month, and where you can make savings.

But where should you put the money you save?

Pensions

For retirement planning, pensions are the obvious first port of call. If your employer offers a pension scheme that it contributes to on your behalf, then it’s worth signing up for – free money is rarely worth turning down.

And pensions have the advantage of locking money away, so you know you can’t splurge that cash on a luxury holiday in a moment of madness. You can even follow these six steps to learn how to treble your pension!

But, of course the flip side is that they are inflexible – and you may not be happy about the possibility of having to use your precious pot to buy an annuity.

ISAs

But pensions are not the only way to save for retirement. You may prefer the flexibility of a Cash or Investment ISA for your hard-earned cash. The benefit here, of course is that interest is paid, free of tax and the pot is yours to do with as you wish.

Current, market-leading, instant access Cash ISA accounts include the AA’s Internet Access Cash ISA, which pays 3.05%AER (inc. 1.35%AER 12-month bonus).

But if you’re happy to leave your money alone for five years, the Bank of Ireland is paying 4.5% AER on sums of £100 plus. Check out New top easy access ISA for a look at some of the best ISAs around.

The sooner, the better…

But however you choose to save, just get on with it and start. Stashing away even the smallest sum each month will produce a satisfying nest egg over time.

Like the Chinese, we should realise we are all fundamentally responsible for our own retirements. A bit of time and effort spent getting financially organised now could mean a huge difference in lifestyle when we’re old.

Happy saving!

More: Why pensions are better than an ISA |The UK's best Cash ISAs