savings rate in Belgium

[loutfard]

A study of Belgians and their wealth contains a rather interesting savings rate table.

[DutchGirl]

Oof, I found this table hard to understand. The percentages in the second and third column are apparently the percentages of Belgian households who have the savings rate mentioned in the first column when it comes to their monthly income (column 2) or additional income (column 3).

As also described in the text that accompanies this table: "How much of their income do Belgian households currently save? In this, we distinguish between monthly income and additional income, such as year-end bonuses, holiday pay or other bonuses.
The largest group of households (44%) save 0% to 10% of their fixed monthly income. As we move into higher percentages, the groups get smaller and smaller.
There is a different pattern for supplementary income. 9% save 70-80% of this supplementary income, 7% even save almost the entire supplementary income. "

So 2 out of 3 Belgian households save 20% or less of their monthly income. But when it comes to irregular/additional income, people are inclined to save a bit more from that (or so they say).

First of all, this is self-reported. And so I also find it funny that there is no option to save LESS than 0%, while we know that there must be a percentage of the population that is currently going into debt and thus indeed going negative.

[ertyu]

I assume the negative people are included in the 0%

[loutfard]

Oof, I found this table hard to understand. The percentages in the second and third column are apparently the percentages of Belgian households who have the savings rate mentioned in the first column when it comes to their monthly income (column 2) or additional income (column 3).

It is clear to most Belgians. Most employees here receive 13.92 times their ordinary monthly salary per year, as a legally mandated part of the end-of-year bonus and extra holiday pay. Additional income is clarified early on in the document as mostly this.

First of all, this is self-reported.

I understood the data sources to be mostly other than self reported. In other parts of the report, they especially mention the very distorted view Belgians have of their own finances.

And so I also find it funny that there is no option to save LESS than 0%, while we know that there must be a percentage of the population that is currently going into debt and thus indeed going negative.

Absolutely. Do note that Belgium makes it more difficult to run a sustained deficit. Consumer credit law is rather more strict. As an example, the national bank keeps an archive of all credits extended to Belgian residents. Banks are required to consult this before extending credit. If they award an excessive credit in any way (amount, strictly enforced legally mandated maximum interest rate, ...), the consumer can walk away keeping the money and pretending the loan did not exist.

[chenda]

I believe in Singapore citizens are legally required to save 20%+ of their income, which is held in escrow and can only be accessed for government approved purposes.

[zbigi]

I believe in Singapore citizens are legally required to save 20%+ of their income, which is held in escrow and can only be accessed for government approved purposes.

Looks like it's mostly just their old age pension scheme, so the forced savings are in lieu of national insurance contributions.

[DutchGirl]

Absolutely. Do note that Belgium makes it more difficult to run a sustained deficit. Consumer credit law is rather more strict. As an example, the national bank keeps an archive of all credits extended to Belgian residents. Banks are required to consult this before extending credit. If they award an excessive credit in any way (amount, strictly enforced legally mandated maximum interest rate, ...), the consumer can walk away keeping the money and pretending the loan did not exist.

Oof! That's quite the punishment for the bank. Here in the Netherlands, there are also regulations on how banks have to check whether people are creditworthy, but trespassing those rules then gives a fee which is probably not even 1% of the amount the banks make in profits/interest. Just fully losing the full amount of money that the bank has lent would be a much bigger incentive to do your checks well as bank.

[Jean]

I think it would be great if all loans weren't legally enforceable,and that only consequence for defaulting would be to end up on some blacklist.

[chenda]

I think it would be great if all loans weren't legally enforceable,and that only consequence for defaulting would be to end up on some blacklist.

I would imagine that would eradicate credit.

[zbigi]

I think it would be great if all loans weren't legally enforceable,and that only consequence for defaulting would be to end up on some blacklist.

Why would anyone lend anything in such circumstances?

[Jean]

Because lending to a trustworthy borrower would still be a way to get good returns. But now it's too easy, you can lend to anybody, get returns, and if the borrower can't pay, you get everything they have and the collectivity cares for them. The risk for lending as an institution is too low, and too much of the burden caused by credit is carryed by the public.

[Lemur]

@Jean

Unless I am misunderstanding something, isn't that not the idea behind a credit score? (at least this is how they do things in the USA). A really low credit score is effectively a blacklist, unless a lender wants to take on the risk anyway - which they might but they will give you an atrocious interest rate in exchange. And loans technically are semi-enforceable. You won't go to jail (no debtors prison) but you can have a debt go to a collection agency and possibly have wages/benefits garnished.

[chenda]

I believe in some US states your primary residence is a protected asset in the event of bankruptcy regardless of how much it's worth.

[delay]

I think it would be great if all loans weren't legally enforceable,and that only consequence for defaulting would be to end up on some blacklist.

Consequences for defaulting vary wildly but not quite that far! AFAIK all systems allow the creditor to sell the debtor's non-essential possessions. On the soft end, the US have easy bankruptcy, and their bankruptcy discharges debts. On the harsh end, in the Netherlands bankruptcy means your creditors get to sell your stuff, but your debt remains. The Netherlands thus offers an extra option of "debt sanitation" which discharges your debt if you hand over all your assets to an administrator and live on the minimum wage for three years. Half the applications for "debt sanitation" are denied, and of the half that remain, half are cancelled during the three years for bad behavior. That's a 25% success rate, and you can't retry within five years

So US people can discharge debts whenever, and Dutch people get a 1 in 4 chance to exchange three years of their life for discharging debts.

I would imagine that would eradicate credit.

What if the blacklist was public? So there would be a black mark next to your name on FaceBook, WhatsApp, Instagram and the like?

[rube]

...means your creditors get to sell your stuff, but your debt remains....

Not exactly: the profits from the sales will be (of course) deducted from your original debt. So some part of the debt may remain (unless you have made use of the mortgage guarantee - nationale hypotheekgarantie).

[chenda]

So US people can discharge debts whenever, and Dutch people get a 1 in 4 chance to exchange three years of their life for discharging debts.

My understanding is that personal bankruptcy is much more common in the US due to healthcare bills and litigation with punitive damages. Some have argued having a protected primary residence encourages more risk taking knowing you won't be turfed out in the street if your start up collapses in a mire of unpaid debt.

What if the blacklist was public? So there would be a black mark next to your name on FaceBook, WhatsApp, Instagram and the like?

I believe China's social credit system does something similar to that.

[ducknald_don]

One thing you can do in the US is hand the keys to your house back to the bank. We don't have that in the UK, if your house depreciates then you are liable for the difference (as I experienced after I bought my first place).

[delay]

I believe China's social credit system does something similar to that.

There used to be a lot of Chinese students where I live, and I chatted with a few of them. Overall so unlike the West that I'm not sure I really understood. Chinese are totally unafraid of their government which they perceive as being on their side. The idea of government control or punishment was alien to them. They thought social credit was a funny story Westerners tell about Chinese.

As I understood it they said there was no personal bankruptcy in China. Yet Chinese pay their debts. Perhaps they are mostly motivated by reputation? They sounded like they didn't care about reputation with their government, but family status was very important. So perhaps it's not "social credit" but "family credit" Or maybe "social harmony", they mentioned harmony as something they value.

One thing to note is that China is a nation of savers (see these numbers). A nation of savers should have far fewer defaults than a nation of spenders.

[DutchGirl]

If you would count retirement contributions, then many people contribute more to "savings" than they realized. And often they do it without realizing it. For example, in the Netherlands one contributes to the national pension plan and in return will (well, hopefully) receive monthly payouts once reaching a certain age. It's currently 17.9% of your pretax paycheck that goes to this up to a maximum of 5664 euros per year. Also, many Dutch people still have a work pension plan, which also can take about 10-15% of your pretax paycheck (and by the way, often the employer is obligated to match that, so personally I would then count my salary as x% higher but never seeing that x% because the employer pays it out to the pension organisation, not to me). So for me personally, about 30% or so of my pretax paycheck goes to retirement contributions with me hardly noticing it (because I have never seen this money to begin with, ever).

I guess some people are also saving by paying off their house. The result of which will hopefully become clear once they have a paid off house, which can take a couple of years.