by Yale University economist James Choi, 45 offered some sort of savings advice. Of these, the usual savings rate advocated fell in a range between 10 and 15 per cent of income. Four books recommended a 20 per cent plus savings rate , while two recommended a whopping rate of 50 per cent ., published in 2005, famously advocates the 50:30:20 rule, being that you should spend 50 per cent of your take-home pay on ‘needs’, 30 per cent on ‘wants’ and save the remaining 20 per cent.
Either way, it turns out that economists disagree with pretty much every personal finance expert on this issue. Or as Choi delicately puts it: “Popular advice frequently departs from normative principles derived from economic theory”.Economists, as it turns out, think savings rates should vary over your lifetime, and even be negative at times. “Economists think about optimal savings rates in a way that is probably counterintuitive to the layperson,” explains Choi.
Get that? Economists are actually fine with you racking up some debts early in life, particularly student debts which increase your future income-earning potential. Then, as you get older, your income will rise, and you’ll be able to set aside a higher proportion of your income as savings, while still funding a similar level of consumption.
So you're saying don't trust the experts.
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