“Saving rate” vs. “savings rate” — What’s the difference?

“Saving rate” vs. “savings rate” — What’s the difference?

Those who know me well will tell you that I'm something of a pedant. I'm not proud of it.

Left to my own devices, I'm one of those who'd go around correcting everybody's grammar. It grates on my nerves when people mangle their usage of “me” and “I”, for instance. (It's never okay to say, “She gave that to my wife and I.” And you can't make “I” possessive: “My wife and I's house is big.” Blarg!)

That said, I've learned to let things go in my old age.

Generally speaking, I just ignore grammar errors. Maybe once or twice a year, I'll correct somebody if I think they might want to be corrected. (Maybe they're another writer, for instance. Or maybe they're trying to present themselves professionally and the mistake interferes with that.)

Besides, I'm not perfect. I make mistakes of my own. I have idiosyncrasies of my own. (The way I punctuate with quotation marks is deliberate but it's certainly nonstandard.)

There's one usage problem in the world of personal finance that bugs me to no end, though. While I know there's no hope that I'll ever fix this — few people will be persuaded by my arguments, fewer still will see a reason to change — I've decided it's time to set the record straight haha!

Are you ready? Let's go!

Folks, there's a difference between the terms “saving rate” and “savings rate”. The two are not the same. And generally speaking, when people in the early retirement community talk about “savings rate”, what they really mean is “saving rate”. Confused? Let me explain.

  • Your saving rate is the rate at which you save. If you earn $100,000 per year and save $50,000, you have a saving rate of 50%.
  • Your savings rate is the rate you earn on your savings. If you have a high-yield savings account that carries a 1.50% APY, then your savings rate is 1.50%.

When an early retirement enthusiast gushes that she has a 37% savings rate, what she's saying — in a literal sense — is that she's earning 37% on her bank deposits. She's claiming she has a savings account that earns 37% interest. That's not what she intends to say, but it's what she's saying.

It's not just FIRE folks who get this wrong. Investopedia gets it wrong. Book and magazine authors get it wrong. Bloggers get it wrong. Academics tend to get it right. The government gets it right too, believe it or not, as do most large financial institutions.

It's big news lately, for instance, that the U.S. personal saving rate has spiked to record levels due to the coronavirus pandemic. The Federal Reserve reports that the country's April 2020 saving rate was an astounding 33.0% (when the modern average is about 7.5%).

April 2020 saving rate

But when journalists write about this news, they invariably change “saving rate” to “savings rate”, such as in this article from CNBC.

Savings rate headline

I think people conflate these two terms because they sound so similar. Plus, in casual conversation you can usually understand what a person means thanks to context.

Again, I realize I'm probably spitting into the wind here. Most people probably don't care. But it's my hope that maybe two or three or four folks in the FIRE community will see this and say to themselves, “Well, gosh, that's a good point. I'll start saying ‘saving rate' instead.” But probably nothing will ever change.

When I was the salesman for my family's custom box company, I'd often listen to talk radio. One of the local hosts here in Portland had a terrible habit of saying things like “SAT test” or “VCR recorder”. (This was back in the 1990s when VCRs were the standard.) The redundancy drove me nuts. Similarly, it drives me nuts when people say “savings rate” when they mean “saving rate”. But I think I'm the only one in the world who is bothered by this. (My buddy Joe at Retire by 40 gets it right, which makes me happy.)

Okay, end of rant. This is J.D., your personal-finance pedant, signing off.

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Elizabeth
Elizabeth
2 months ago

Fellow grammar nerd here =) Just updated my budget spreadsheet from “Savings Rate” to “Saving Rate” (currently at 60+%, whee). Love your writing — thank you!!

Big-D
Big-D
2 months ago

The biggest issue with the English language is that it changes. Things even 20 years ago that meant one thing mean a different as people use them wrong and become “popular phrases”. One of the ones which I hate is “The point is Mute”. The phrase is the point is “Moot”. People have said it wrong so many times the common language phrasing has been co-opted to accept both for the same thing by many programs, even OED and Webster’s. I am in IT Security and one that gets me all the time is “Data at Rest”. The very definition… Read more »

Hans
Hans
2 months ago

If you wanted to refer to the percentage of people in a population that were saving (that is, with a saving rate >0%), what term would you use? Saver rate?

Steveark
Steveark
2 months ago

Well actually, I just love saying that! Savings rate could be accurately used to describe any kind of rate that applies to one’s savings. It might be the interest rate, as you define it. Or it might be the rate at which your savings are increasing(or decreasing). It might even be the tax rate on the interest of your savings.

zzzzzz
zzzzzz
2 months ago

“Saving” is a verb. “Savings” is a noun.

That difference is consistent with your point.

Carroll
Carroll
2 months ago

Thank you for this post. It bugs me too when writers confuse saving with savings. And it’s not just financial — daylight savingS time (sic) just hurts my ears.

Bob
Bob
2 months ago

I read a lot of personal finance articles, and this is the first time I’ve ever felt the need to comment. This article is beyond trivial. How pointless and who cares? Savings rate works just fine, get over yourself and stop producing this rubbish.

Mark Daniels
Mark Daniels
2 months ago
Reply to  Bob

The article provides clarity on potentially ambiguous terminology. I’d argue that your comment is the more trivial and pointless of the two.

Hopefully it made you feel good to write it.

Adelanteyeducate
Adelanteyeducate
2 months ago
Reply to  Bob

That’s unnecessarily rude. Move along and decline to read if you don’t like it.

Annie
Annie
2 months ago

I learned something. I assumed savings rate meant referred to the rate at which you added to your savings.

Joe
Joe
2 months ago

Whew! I’m glad I got it right with my latest post. 😉

I used the wrong one many times. It’s confusing.

John Flynn
John Flynn
2 months ago

I agree with you and support this. Keep fighting the good fight there J.D.!

The one that destroys my will to communicate is using a noun as a verb when the noun doesn’t exist anymore. If you have a DVR, you record shows. My mother in law says she “tapes” shows to the DVR. There is no tape involved in this process. The Floyd murder was “filmed” even though there was no film involved? no, it was recorded digitally on a cell phone.

zzzzzz
zzzzzz
2 months ago

Does PIN number bug you too?

zzzzzz
zzzzzz
1 month ago
Reply to  J.D. Roth

One way to maintain equanimity when encountering not just poor grammar, but more generally poor writing, is to find humor in what people actually write, as opposed to what they probably meant. WRT things like PIN number, another approach to consider is more educational, rather than giving in. If you think your readership won’t get “PIN” without “number,” perhaps you could write, “PIN (personal identification number).” BTW, I think the College Board no longer uses SAT as an acronym, so “SAT test” is no longer as redundant as it was when the T actually stood for Test. Its redundancy now… Read more »

Brian Thomas
Brian Thomas
2 months ago

Love the article!

Last edited 2 months ago by Brian Thomas
Linda Practical Parsimony
Linda Practical Parsimony
2 months ago

My tongue is mangled from refraining from correcting grammar. I just correct the tv to satisfy my desire to correct things people say incorrectly.

Mapleton Reader
Mapleton Reader
1 month ago

Grammar mistakes can be annoying to me. Logical mistakes and fallacies are much more critical. I can always spot several logical fallacies on the evening news (see https://yourlogicalfallacyis.com/) and wonder how many people are taken in by them.

The horrible thing is that I don’t always catch the logical errors in my own thinking. Otherwise I have to accept the fact I could be wrong.

JP
JP
1 month ago

I had to google “pedant”. I guess that means I am not a pedant.

Kelly in Texas
Kelly in Texas
1 month ago

Thanks! I didn’t know this… although I suspect it will bug me constantly now, too!

Jerry
Jerry
1 month ago

Something that I have never seen in these discussions is how you calculate income. Is it MAGI or AGI?

Shelley Stevens
Shelley Stevens
28 days ago

Well gosh, that’s a good point. 😉 I never thought about it before. I can promise you I will think about it every time I begin to write “savings rate” or “saving rate” in the future. Thanks for the grammar education!
Oh, and GREAT featured image!

Engineermyfreedom
Engineermyfreedom
27 days ago

Never noticed the difference before but I am sure it will now begin to drive me nuts if I see it being used wrong in future 🙂
Im on a 35% saving rate at the moment, working to get this up to about 60% in the next couple of years

paul
paul
27 days ago

If you are going to be so precise, you should note that a proper rate is a ratio of one thing t another at any given point in time (like velocity in miles per hour). If it is a fixed proportion / ratio it is averaged over a period of time not each dollar earned divided into savings and other uses. The person who makes 100K a year and saves 50K has an annual saving rate of 50%. There saving rate on a day to day basis or month to month changes. The graph shows monthly saving rateS that are… Read more »

Donna Freedman
Donna Freedman
18 days ago

And don’t get me started on “literally.”
— Your fellow pedant

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