Asian wisdom teaches that saving money is not merely about accumulating wealth but also about fostering personal virtues and discipline.

The high savings rates in emerging Asia have played a crucial role in the region's rapid economic growth over recent decades.

These savings contribute to economic development by directing funds into productive investments, supporting urbanization, and driving the swift growth of the region's manufacturing sectors.

Emerging Asia's savings rate surged significantly from around 30% to nearly 45% during the 2000s, while advanced markets saw their savings rate decline from 25% to 20%. The gap between Emerging Asia and advanced economies widened from 2.2 percentage points in the 1980s to 8.2 percentage points in the 1990s, and 16.4 percentage points in the 2000s.

By the 2010s, this gap reached almost 20 percentage points before narrowing and stabilizing in recent years. A major factor behind this trend is China, whose savings rate peaked at 51.6% in 2008 and is expected to drop to 43.8% by 2024. Other key markets, such as India and Indonesia, have also experienced slight slowdowns in savings growth.

Frugality is crucial in driving economic growth in lower-income countries, particularly those with limited access to foreign capital and away from the cutting edge of innovation. This highlights the importance of capital accumulation in fostering growth in emerging markets, in contrast to advanced economies that rely more on productivity growth, often measured through total factor productivity (TFP).

Asia’s high savings rate also has an international dimension. For many Asian countries, higher savings are not entirely used domestically, instead, a significant portion is channeled overseas through positive trade balances. When a country produces more than it consumes, the surplus is typically reflected in exports. These exports are often invested in overseas sovereign bonds, financing foreign consumers' ability to purchase Asian exports.

<h3>Savings and Insurance</h3>

Insurance demand is influenced by a range of factors, both local and specific to individual markets. Attitudes towards risk also play a role; for example, risk-averse consumers are more likely to own insurance. However, the perception of the riskiness of insurance products also matters.

The impact of higher savings rates on insurance is generally positive, though it depends on the type of savers—households, corporations, or the public sector and the underlying motivations for saving. If consumers view insurance as a savings vehicle, it competes with other financial products like equity, mutual funds, and deposits.

<h3>Motives for Household Savings</h3>

Savings are not simply what remains after monthly expenses; many people make conscious efforts to save, despite the lack of financial planning observed in some cases.

<b>Precautionary Motive</b>

Many individuals and households save as a form of self-insurance against life's uncertainties, such as unforeseen medical expenses. This is especially common in countries where social security systems are underdeveloped and private insurance options are limited or unaffordable.

<b>Life Cycle Motive</b>

The life cycle motive is a major driver of insurance demand. Consumers save to smooth their consumption throughout their life, preparing for major events such as buying a house or retirement.

<b>Bequest Motive</b>

In this case, savings are intended to create an inheritance for future generations. Empirical evidence suggests that the bequest motive is positively correlated with demand for life insurance products designed for wealth accumulation.

<b>Wealth Accumulation Motive</b>

Wealthier households typically save more, partly because a lower portion of their consumption is devoted to necessities. High net worth households may be motivated to save for life cycle needs, bequests, or wealth generation.

A high savings rate across both mature and developing Asian markets has played a crucial role in driving rapid economic growth in the past. While the aggregate savings rate has declined in recent decades as markets in the region mature, it remains considerably higher than that of major advanced economies.

Savings and the desire to protect them are key drivers behind the demand for insurance, particularly life insurance. Yet, it is important to recognize that a high savings rate alone does not tell the whole story without understanding its underlying dynamics.

Why and How Asians Save Money - Up to 50% More

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