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Around the world: Where saving big matters less

  • Global savings in perspective

    Americans aren’t the only poor savers in the global neighbourhood.

    Savings rates for households in the United States are consistently ranked among some of the lowest in the world. About 50% of Americans don’t have enough saved to cover three months of living expenses, according to a recent Bankrate.com survey.

    But, while Americans’ low savings rates have been cause for alarm, there are a number of other countries where citizens save at similarly low rates. The US ranks closest to Estonia, Ireland, Italy and the Netherlands.

    The difference: social supports in some countries make savings less crucial.

    That sub-4% savings rate in the Netherlands, for instance, is likely more than enough to cover emergencies and luxury extras. In many countries, public health care is the norm and government subsidies or programs cover university costs and supplement large chunks of income in retirement.

    In contrast, many Americans find themselves hampered by high healthcare and college costs and have limited social support systems in retirement.

    The Organisation for Economic Co-operation and Development (OECD), an international economic organization, published a households savings rate forecast table in mid-June that reported and projected the percentage of disposable household income in about 30 developed nations from 2007 to 2014.

    Here is a look at some welfare standards in five low-savings rate countries — and how their social supports stack up.

    (Justin Sullivan/Getty Images)

  • In Italy...

    Disposable income saved in 2013: 3.9%

    Healthcare: The Servizio Sanitario Nazionale (SSN) is Italy’s national, public and government-run health care program. While some services, such as visits to specialists, can require co-pays starting at about 30 euro ($40), general doctor visits and emergency care are entirely covered.

    Higher education: Italy has both public and private universities. Public universities, which dwarf private universities in number, are heavily state-funded and charge minimal tuition that correspond to a student’s income (or that of his or her family). Private universities, attended by fewer than 10% of Italian students, are more expensive. They generally charge about 4,000 euro to 8,000 euro ($5,145 to $10,290), and sometimes more.

    Old-age pensions: In Italy, pensions for the elderly include Notional Defined Contribution (NDC) and social insurance, or allowance, which is means-based and promised to those with limited income and unable to contribute. Perhaps partly owing to the quality of its healthcare system, which the World Health Organization has ranked as one of the best in Europe, life expectancy is long in Italy.

    As in some other European countries, retiree pensions are in an uncertain place as the aging population is disproportionate to what the economy can support. The ratio of elderly to the working-age population was at about 30% in 2010 and is expected to hit 48% in 2030, while the country also runs high public debt.

    (Francois Xavier Marit/Getty Images)

  • In the Netherlands...

    Disposable income saved in 2013: 3.8%

    Healthcare: Under the Dutch system, healthcare is universal and is both privately and publicly funded. Primary care and hospital visits are covered by private, mandatory insurance packages, which are one regulated price. Employers are required to help cover part of that cost. All citizens over the age of 18 pay a flat-rate premium for the standard insurance package, which is about 100 euro ($128.50) per month. Taxes are collected to cover social insurance for long-term care. While most hospitals and insurance companies are privately run, they are not-for-profit. Dental care over the age of 18 falls outside the standard insurance package.

    Higher education: The government sets the fees for public universities, which total about 2,000 euro ($2,570) per academic year. Private universities — there are about one-third as many of them as there are public universities — tend to charge more. About 85 percent of university students attend public schools.

    Old-age pensions: The Netherlands offer universal pensions, which are available to citizens at age 65. Monthly benefits come to about 34% of average income.

    (Mark Dadswell/Getty Images)

  • In the United States...

    Disposable income saved in 2013: 2.4%

    Healthcare: Despite the roll out of the Affordable Care Act, which greatly expands access to healthcare, care is not universal in the US. It is one of the only developed nations in the world without universal healthcare. Annual out-of-pocket healthcare expenses are expected to reach an average of $3,301 per U.S. household by 2014, the government has predicted.

    Higher education: The university system includes both public and private universities. While public universities receive government subsidies to offset the cost of tuition, they are not free to attend. The US has some of the most illustrious private universities in the world, but also the most expensive. The average cost of tuition and fees for the 2012–2013 school year was $29,056 at private colleges and $8,655 for in-state residents at public universities, according to New York-based College Board, a higher-education preparatory group.

    Old-age pensions: Social Security in the US requires contributions from both employers and employees. Once retired, people receive payments that correspond to how much they contributed during their working years. Payments amount to about 17% of the average monthly income a retiree earned before collecting social security — and only those who have paid into the social security system via payroll taxes and earned a minimum amount are eligible to collect payments, starting after the age of 62.

    It is expected more people will have to pull from private savings. The Social Security Board of Trustees’ estimated in its most recent, annual report that only 75% of scheduled benefits would be able to be paid starting in 2033.

    (Bay Ismoyo/Getty Images)

  • In Ireland...

    Disposable income saved in 2013: 3.3%

    Healthcare: Public (universal) healthcare in Ireland is governed by the Health Service Executive, which was established with the Health Act 2004. The reformed universal system is still being implemented and the parallel private healthcare market continues to operate. Visits to the general practitioner can run as high as 80 euro ($103) per visit, which private insurance plans help cover.

    Higher education: University tuition in the Republic of Ireland is free for all students belonging to the European Union. Student service fees are charged to cover costs like registration and exams and total about 1,500 euro to 2,000 euro($1,930 to $2,570) per year.

    Old-age pensions: Ireland has a contributory state pension scheme, called PRSI (Pay Related Social Insurance), to which all employees contribute a portion of their paycheck. It also guarantees a pension for those unable to make payments to the pension scheme, which covers approximately 13% of the population over 60 years old. Monthly benefits total about one-third of the collective average monthly working income.

    (Philippe Huguen/Getty Images)

  • In Estonia...

    Disposable income saved in 2013: 2.9%

    Healthcare: Estonia, a member of the European Union since 2004, offers universal healthcare under a system that has rapidly and successfully transformed over the past 20 or so years, according to the World Health Organization. The system ensures coverage for a range of services including basic physician care, long-term care and rehabilitation. Dental care is free for those age19 and under and after that partial reimbursement for services is available. The OECD categorized out-of-pocket healthcare payments for Estonian citizens as “relatively high… especially for pharmaceuticals and dental care”, in an April 2011 survey.

    Higher education: Public university is free for students who score above a certain grade on an entrance examination. Private universities set their own tuition rates, which are on par with the rest of Europe, starting at about 4,000 euro ($5,140). The vast majority of students attend public university, with about 25% enrolled in Estonia’s most esteemed public university, University of Tartu.

    Old-age pensions: The pension system in Estonia is multi-pillared and includes an earnings-based scheme with mandatory contributions from employers. In addition, a basic national pension (a proverbial safety net) covers about 2% of the population over the age of 60, with monthly payments amounting to about 13% of the average monthly worker’s income.

    (Jamie McDonald/Getty Images)

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