What is the savings rate?
The savings rate is the percentage of your income that you keep for the future instead of spending. The formula is simple: savings rate = monthly savings ÷ monthly income × 100. Saving Tk 6,000 out of Tk 40,000 is a 15% rate.
Savings here means every kind of money set aside for the future: a savings account, DPS, FDR, sanchayapatra, new money into shares or mutual funds, pension contributions. Income is usually take-home pay (after tax and deductions). Whichever way you measure it, measure it the same way every month.
Say Sumon earns Tk 80,000 and saves Tk 8,000; Rumana earns Tk 30,000 and saves Tk 6,000. Sumon saves more taka, but his savings rate is 10% and Rumana’s is 20%. Relative to her own lifestyle, Rumana is building a cushion twice as fast. The numbers are only an example.
Why it matters to an investor
- It is fully in your control: no one controls market returns, but you decide what share of income to keep.
- In the early years it matters more than returns: while savings are small, extra money saved each month makes far more difference than an extra 1–2% of return.
- It works on both sides: a higher rate means saving more and at the same time living on less, so goals get closer from both directions.
- Fuel for compounding: money has to be saved before it can compound; the savings rate is the flow of that fuel.
How much households save in Bangladesh
According to the BBS Household Income and Expenditure Survey (HIES) 2022, the average household earns Tk 32,422 a month and spends Tk 31,500. Average monthly savings in the survey came to about Tk 923, roughly 3% of income.
People often under-report income in surveys, so real savings may be somewhat higher. Still, the picture is clear: after food and basics, many households have very little left. That is why starting with a small rate and raising it gradually is the realistic path.
Source: BBS, Household Income and Expenditure Survey 2022 (Prothom Alo English, December 2023)
See the numbers as a table
| Spending | Savings | |
|---|---|---|
| Each month | 31,500 | 923 |
What rate is “enough”?
There is no single right rate. The 50/30/20 rule suggests saving 20%, but not everyone can manage that from the start. How much you need depends on your age, goals, family responsibilities, and whether you have a pension or other safety net. Starting late or aiming high needs a higher rate.
- When your pay rises, send a share of the raise (say half) straight to savings. Your lifestyle doesn’t shrink, yet the rate goes up.
- Decide in advance on a fixed share of one-off income, such as bonuses, festival allowances or large remittances, for saving.
- Move savings out on payday, not at month-end. What stays in sight tends to get spent.
Worked example
- Income Tk 40,000. At 15%: save 6,000, spend 34,000. Six months of spending = Tk 2,04,000.
- 2,04,000 ÷ 6,000 = 34 months, nearly three years.
- At 25%: save 10,000, spend 30,000. Six months of spending = Tk 1,80,000.
- 1,80,000 ÷ 10,000 = 18 months, a year and a half.
Result: going from 15% to 25% nearly halves the time, because you save more and the cushion you need gets smaller. Interest or profit is ignored here; the numbers are only an example.
Common mistakes
- Watching only the amount, not the rate. When income rises, the amount can grow while the rate falls.
- Thinking “spend first, save what’s left”. Usually nothing is left.
- Counting as savings money that will be spent within weeks. That isn’t saving; it is spending on hold.
- Judging yourself by someone else’s rate. Everyone’s income, family and duties differ; the real test is whether your own rate is rising over time.
The share of income you save matters more than the amount. Start with a small rate, and nudge it up every time your income rises.