Warren Buffett has something to say about pretty much everything, and in most cases it’s pretty good advice. So, it doesn’t come as a surprise that what Buffett has to say about Americans saving (or lack of) is also pretty spot on and insightful.
Buffett has spoke out about Americans saving their own money on multiple occasions at Berkshire meetings and discussions with students. Honestly, it’s something that doesn’t get a whole lot of attention even though the facts are there. Take a look at some statistics:
- 69% of Americans have less than $1,000 in savings
- 18% of Americans have no savings at all
- 76% of Americans are living paycheck to paycheck
Those statistics are pretty shocking and maybe even a little bit scary when you consider the fact that it’s recommended to have 3 – 6 months worth of living money saved up in case of an emergency or lay off. So, what does the oracle of Omaha have to say about the subject?
“The savings rate has fallen… But the value of the country in real terms increases decade to decade… It is nothing compared to China or Korea where the savings rate is very high. We may not save very much because we don’t need to. We are a very rich country, and we may not need to save as much as other countries trying to reach their potential.”
You can tell that Buffett does not feel quite as passionately about what he is saying here than the quotes following this, but I appreciate him sharing his thoughts on the subject. On the national level, China has a savings rate at about 50%, while the United States is well under 20%. In households, China’s savings are said to be about 33% of their income on average while the United States stays around 5%. While it does sound speculative, apparently Buffett doesn’t think we need to worry about it all that much. Regardless, here are a couple pieces of advice that Buffett has shared on the subject to help put your mind at ease and start your savings account.
“Don’t save what is left after spending; spend what is left after saving.”
Most of us, after taking care of bills and debts, take the rest and use it as spending money rather than focusing on saving. One of Buffett’s most famous quotes warns not to confuse the cost of living with the standard of living, and to simply live within your means. In their simplest form, both quotes are a reminder to be more frugal, in general, like Buffett. By trying to live within your means and save what is left, you’ll have a good mindset to start saving.
“I think the biggest mistake is not learning the habit of saving properly early. Because saving is a habit… It’s pretty easy to get well-to-do slowly.”
Buffett is a huge believer that most behavior is habitual, and he shared that thought in a speech to students at the University of Florida. This piece of advice is a lot more straightforward; start saving early and it will become second nature and you’ll be able to reap the benefits.