Why don't people generally save more of their income?
"If one takes a slightly more expansive view of the word ""saving"" to include most forms of durable asset accumulation, I think the reason some do and most don't is a matter of a few factors, I will include the three that seem obvious to me: Education Most schools in the US where I live do not offer personal finance courses, and even when they do, there is no opportunity for a student to practice good financial habits in that classroom setting. I think a simple assignment that required students to track every penny that they spend over the period of a few months would help them open their eyes to how much money is spent on trivial things that they don't need. Perhaps this would be more effective in a university setting where the students are usually away from home and therefore more responsible for the spending that occurs on their own behalf. Beyond simple education about personal finances, most people have no clue how the various financial markets work. If they understood, they would not allow inflation to eat away at their savings, but that's a separate topic from why people do not save. Culture Since much of the education above isn't happening, children get their primary financial education from their parents. This means that those who are wealthy teach their children how to be wealthy, and those who are poor pass on their habits to children who often also end up poor. Erroneous ideas about consumption vs. investment and its economic effects also causes some bad policy encouraging people to live beyond their means and use credit unwisely, but if you live in a country where the average person expects to eat out regularly and trade in their automobiles as soon as they experienced their highest rate of depreciation, it can be hard to recognize bad financial behavior for what it is. Collective savings rates reflect a lot of individuals who are emulating each other's bad behavior. Discipline Even when someone is educated about finances, they may not establish good habits of budgeting regularly, tracking spending, and setting financial goals. For me, it helps to be married to someone who has similar financial goals, because we budget monthly and any major purchases (over $100 or so) must be agreed upon at the beginning of the month (with obvious exceptions for emergencies). This eliminates any impulsive spending, which is probably 90% of the battle for me. Some people do not need to account to someone else in order to spend wisely, but everyone should find a system that works for them and helps them to maintain some financial discipline." A person who always saves and appropriately invests 20% of their income can expect to have a secure retirement. If you start early enough, you don't need anything close to 20%. Now, there are many good reasons to save for things other than just retirement, of course. You say that you can save 80% of your income, and you expect most people could save at least 50% without problems. That's just unrealistic for most people. Taxes, rent (or mortgage payments), utilities, food, and other such mandatory expenses take far more than 50% of your income. Most people simply don't have the ability to save (or invest) 50% of their income. Or even 25% of their income. This question is likely to be voted closed as opinion-based. That said - In general people have become accustomed to instant gratification. They also have the media showing them luxury and are enticed every day to buy things they don't need.  In the US, the savings rate is awfully low, but it's not just the lower 50%, it's 75% of people who aren't saving what they should.  see http://web.stanford.edu/group/scspi/_media/working_papers/pfeffer-danziger-schoeni_wealth-levels.pdf for an interesting article on the topic of accumulated wealth.
But if increasing demand is brought about by increasing spending, and wide-ranging increased spending appears when many people have money to spend - why not just give everyone some money to spend?   Why tie it to the hourly rate at a job, thereby making tons of positions too expensive for employers to justify?   Seems like a simple allocation of money to everyone, no strings attached, would stimulate demand nicely. I was also going to mention people going through savings during unemployment.  And given the unemployment figures, 28% having no emergency savings even seems low.  Purely anecdotal but I cleared through my savings a few years ago during seven months of unemployment and have several friends who did the same and/or racked up thousands in debt. In a business environment, this phenomenon could be easily explained by 'operational leverage'. Operational leverage is the principle that increasing revenues by a small amount can have a disproportionately large impact on net income. Consider this example: you run a business that rents out a factory and produces goods to sell to consumers. The rent costs you $10k / month, and all of your other costs depend on how many goods you produce. Assume each good gives you $10 in profit, after factoring your variable costs. If you sell 1,000 units, you break-even, because your variable profit will pay for your rent. If you sell 1,100 units, you make $1,000 net profit. If you sell 1,200 units, you double your overall profit, making $2,000 for the month. Operational leverage is the principle that adding incremental revenue will have a greater impact than the revenue already received, because your fixed costs are already 'paid for'. Similarly in personal finance, consider these scenarios: You have $1,000 in monthly expenses, and make $1,000 - your monthly savings (and therefore your wealth) will be zero.  You have $1,000 in monthly expenses, and make $1,100 - your monthly savings will be $100 per month. You have $1,000 in monthly expenses, and make $1,200 - increasing your income by ~10% has allowed your monthly savings double, at $200 per month. You have $1,000 in monthly expenses, and make $2,000 - your monthly savings are 5 times higher, when your income only increased by ~80%. Now in the real world, when someone makes more money, they will increase their expenses. This is because spending money can increase one's quality of life. So the incline does not happen quite so quickly - as pointed out by @Pete & @quid, there comes a point where increased spending provides someone with less increase in quality of life - at that point, savings really would quickly ramp up as income increases incrementally. But assuming you live the same making $2,000 / month as $1,000 / month, you can save, every month, a full month's worth of living expenses. This doesn't even factor in the impact of earning investment income on those savings. As to why the wealth exceeds income at that specific point, I couldn't say, but what I've outlined above should show how it is quite reasonable that the data is as-reported. "It's called disposable income for a reason. It's what's left after obligations, whatever bills you have, and saving. Saving half one's income is pretty much at one end of the spectrum, very few can afford this. The combination of high savings and low actual spending will enable you to retire very early if you wish.  Saving 'only' 15% might actually be out of your comfort zone, maybe 25% will keep you happy. What remains is yours to spend on what you wish, whatever makes you happy. There was a time I joked ""I spent most of my money on women and beer. The rest, I wasted."" Now, I don't mind travel, but it's not my passion. If traveling the world is yours, do it. Enjoy every minute of it." "The few individuals who create the corporations that take advantage of the sharing economy, making it broadly accepted and utilized, make billions.  Those who actually do the work of ""sharing"", not so much, unless they are able to do so out of excess of funds rather than through borrowing.  Those who utilize the sharing economy save some money because they aren't making the investments in infrastructure (cars, housing, whatever) and so aren't paying interest or expending use value.  They can invest that money in sharing economy corporations, gaining value.  So the losers in the sharing economy are those who borrowing in order to ""share.""" "I believe that an understanding of the taxation system can help to understand our place in it, and how that impacts each of our personal finances. I will try to remain unbiased here but this is a somewhat subjective question, so please bear with me if you disagree on any point. Some of these tax savings are well-advertised, and can be used by many people, such as tax credits for mass-transit passes which exists in some countries. But some of these tax savings are things you never heard of before, until it winds up on the news. Why do some people seem to get tax savings that you and I cannot get, and why do those people always seem to have so much more money than us? A simplistic answer can show this in three parts: (1) The source of one's income; (2) Transaction costs; and (3) ""tax loopholes"". Tax savings occur proportionately to one's income, and if the savings apply to investment income, they occur proportionately to one's wealth. If someone living paycheck to paycheck with a minimal amount in a bank account ""saves tax on investment income"", they might reduce their taxable interest from $50 to $0. That's because they simply don't have any other investment income to reduce. All of their income comes in the form of employment, which is typically very hard to save taxes on. Most governments have a very firm grasp on the taxation of employment income, because it is a huge proportion of income in the country (and therefore has the largest amount of tax associated), and because it is very straightforward (work for someone = employment income). A more cynical person than I might point out that investment income is earned by the very wealthy, who can afford to lobby for politicians to pass favourable investment income laws. Even very straightforward tax saving opportunities may cost money to enable. The simplest example would be: if a tax saving opportunity is so complicated that an average person can't understand it themselves, then an accountant, lawyer, or banker will need to be the one to explain it. And that can cost you money. If your tax isn't so much to begin with, then the transaction costs to achieve the tax savings could be higher than the tax savings themselves. For example, most countries have tax savings / deferrals if you start a corporation. These rules typically exist to promote investment in the local economy. But someone who earns $10k in a side-business might not be able to afford the $3k in incorporation costs just to save $2k in taxes. The more income and wealth you have, the more these transaction costs become worthwhile. I'm going to generally define ""tax loopholes"" for the purposes of this answer as something where a somewhat arbitrary situation allows for taxes that a layman would consider unfair or unexpected. This often occurs with good intentions but poor legislation - the government tries to provide a benefit to a deserving group or to promote an activity, but ends up allowing another group to take advantage.  For example in Canada, there existed until a few years ago tax saving rules about passing on wealth to children at lower tax rates, only when a close family member is near-death [setting up a 'testamentary trust' between a grandparent and a grandchild could in some circumstances allow that trust to be created with additional 'tax brackets', meaning more income would be taxed at a less-than top tax rate before being distributed to the grandchildren].  The rules were put in place with the idea that ""oh gee, a family member has died, and the dang ol' family is grieving so hard they can't distribute the wealth to the next generation for a few months on account of all the crying. We should make it so that the estate is taxed like a person, and if they earn only a little income, they have a low tax rate, and they only get taxed at the full rate if they have a lot of income"". Seems reasonable enough, but if a family is ready to pass on wealth at the same time as someone is nudging the bucket with their foot, a morbid discussion with your lawyer and accountant could set your children up for life with forever reduced taxes on massive inheritances.  In the case of the Panama / Paradise leaks, tax savings are due to all 3 of the above: Those who have massive wealth (and therefore earn the majority of their income from investments instead of employment) can afford the transaction costs associated with taking advantage of specific ""tax loopholes"". The simplest example of which is just that income earned in a foreign country might have a lower tax rate than income earned domestically. This is often a result of ""cracks"" in the foreign tax treaties between countries, which exist generally to promote business between countries and prevent double-taxing individuals who need activity in both countries for whatever reason. Take for example the ""Apple loophole"". Apple has operations around the world. Some activity occurs in low-tax jurisdictions. Apple reports a high percentage of the value of R&D as being associated with those jurisdictions. Those branches in low-tax jurisdictions charge the high-tax branches (such as the US) with fees for use of their valuable research. So much of Apple's income is reported in those foreign jurisdictions. It won't be taxed in the US until Apple ""repatriates"" the cash back to the US. Until then, the cash sits in the foreign jurisdiction, accruing less tax. This and similar rules can be used by individuals wealthy enough to hold corporations in foreign jurisdictions with low tax rates. How each particular rule / ""loophole"" works will depend on the nature of a specific case - tax law is complex, and the rules between countries are even more so. These foreign tax loopholes are closing every year. It is getting harder and harder to hide money offshore, and it is getting less and less likely that you will be able to find a country with juuuust the right loopholes for your own offshore wealth. These types of news leaks will only help to expedite those changes." Developing self-discipline in his spending habits is a prerequisite for dealing with a (sometimes low) variable income.  While it might feel like a roller coaster ride going from boom to bust, develop steady frugal spending habits will ease a lot of that pressure. "It doesn't really make sense to worry about the details of ""what counts as saving"" unless you also move beyond a simplistic rule of thumb like ""save 10% of your income"". That said, most of the sources I see pushing rules of thumb like that are talking about saving for retirement.  That is, you need to sock that money away so you will be able to spend it after you retire.  (This CNN page is one example.)  On that theory, it only ""counts"" if you put it away and don't touch it until you retire, so things like car and computer funds would not count as saving. Another thing you'll see some people say (e.g., this Nerdwallet article) is to use 20% of your income for ""financial priorities"".  This would include retirement saving, but also things like paying off debt and saving for a down payment on a house. Saving for a small purchase in the near future would not usually be considered ""saving"" at all, since you're not going to keep the money.  If you put $5 in your wallet tonight so you can buy a hamburger for lunch tomorrow, you wouldn't call that saving; likewise setting aside a few hundred dollars for a new computer wouldn't ""count"" as saving under most definitions.  (Some people might ""count"" saving for something like a house, since that is a long-term plan and the house, unlike a computer, may rise in value after you buy it.  But you wouldn't want to fully count the house as part of your retirement savings unless you're willing to sell it and live off the proceeds.) However, none of these rules will help that much if your goal is, as you say at the end of your question, to ""know if I need to save more than what I actually am saving currently"".  Saving 10% of your income won't magically ensure that you're saving ""enough"".  To assess whether you personally are saving ""enough"", you need to actually start running some numbers on how much money you personally will need in retirement.  This will depend on any number of factors, including where you live, what sources of retirement income you might have besides savings (e.g., pensions), etc.  In short, to know if you're saving enough, you can't listen to the generic stuff that ""everyone says""; you need to consider your own situation in a deliberate, focused way." I think the key here is 'at any age'. Yes it's not surprising that for demographics who have been in the workforce for a while, $100k won't get you near the top (i.e. Ages 30+).   However, what can be surprising is that even at age 25, $100k isn't enough to get you in the top 1%. So what more of the masses that don't earn anywhere near that number? "Social security and pensions make up a big part of it.  You may want to look at the source of the data.  If a person, has 5K at Vanguard, 5K at Fidelity and 100K at the bank; Fidelity will report on that person as having only 5K.  Vanguard will do the same. The opening pitch of a life insurance salesman sometimes includes the ""100 man story"".  Before retirement age:  26% of people will die, 54% will be broke, 5% will work, 4% will be secure, and 1% will be wealthy.  Then they sell you life insurance which is a horrible product for retirement savings. If you further dig into this subject you will find a great disparity between the mean and median retirement savings.  That is because many Americans have none, and those that do skew the average upward and have no where near mean or average. Its like this with other things in personal finance.  For example those with actual credit card debt have much higher than the average.  As those with none, or even no credit cards skew the average downward.  In my opinion it is like this because of behavior.  If one saved half of the average car payment over their working life in a growth stock mutual fund, they would make it to that 4% category.  If they also had a good salary, kept debt to a minimum, and saved a healthy amount they would make it to that 1% category.  It was a daily choice that was made many years prior to retirement." By not saving some of your income you put yourself at risk of the following: If you are comfortable taking on those risks, then continue what you are doing (I'm not being sarcastic here...some people are perfectly comfortable taking on these risks).  I plan on working until I die so I am not as concerned with saving for retirement but I do save some money for temporary job loss situations. Saving money presents its own set of issues (e.g. Where should I put the money?, Should I invest the money?, What type of investments?).  If you have no interest in researching answers to these type of questions then I would suggest what others have already suggested: have part of your paycheck automatically siphoned into an account that can only be accessed by a trusted family member. Are you sure the question even makes sense? In the present-day world economy, it's unlikely that someone young who just started working has the means to put away any significant amount of money as savings, and attempting to do so might actually preclude making the financial choices that actually lead to stability - things like purchasing [the right types and amounts of] insurance, buying outright rather than using credit to compensate for the fact that you committed to keep some portion of your income as savings, spending money in ways that enrich your experience and expand your professional opportunities, etc. There's also the ethical question of how viable/sustainable saving is. The mechanism by which saving ensures financial stability is by everyone hoarding enough resources to deal with some level of worst-case scenario that might happen in their future. This worked for past generations in the US because we had massive amounts (relative to the population) of (stolen) natural resources, infrastructure built on enslaved labor, etc. It doesn't scale with modern changes the world is undergoing and it inherently only works for some people when it's not working for others. From my perspective, much more valuable financial skills for the next generation are: Not entirely practicle advise. What about healthcare and all those other essential needs?  When it comes down to it if the economy is rockin and rollin like back in the mid-1990's people can easily jump boat to another company.  But in todays more sluggish enviroment that option is not their for most workers.  I think the honest fact is no good solutions are apparent.  You give some ideas but if saving money was that easy for most people then ... well you know ... why would anyone complain, right? We are FAR FAR better off than the majority. That is COMPLETELY true. But the point is that this does not made 300k$ easily, despite being far far far ahead of most. That's the crazy part -- the income disparity.  (P.s., where we live 400k$ gets you the shittiest house in town. You could get a tiny condo for 250k$ too) Not lies.  I worked with punkgeek at some of those startups.  One we founded together and it was a colossal failure.  Two later ones had IPOs in the $700M market-cap range.  If you hang around the valley a while (and get lucky) it gets a good bit easier to sniff out the likely successes.