Q:

What are national savings rates?

A:

Quick Answer

The national savings rate of a country is the amount of income left over once the expenditures and costs of consumption have been subtracted. National savings include money saved from government, business and personal expenditure within a single variable.

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Full Answer

One of the main differences between the national savings rate of a country and similar financial variables such as employer-sponsored retirement and IRA contributions is that the national savings rate also includes government savings. Most governments report deficits due to constant spending, lowering their national savings rate.

Financial and social programs that reduce or increase government spending, such as retirement age, income distribution, borrowing constraints and the population's demography can have a pronounced affect on a country's national savings rate. Retirement pensions represent a key example: a country that pays these pensions using tax income levied from people of working age has a lower national savings rate than a country that obligates or recommends its citizens to personally provide for their own retirement savings.

Since household saving is the primary source of public service funds, governments use the national savings rate to determine how much money they can expect to be able to obtain for public projects through this particular financial vehicle.

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