Chile: Saving For The Future

The financial advisor’s mantra: don’t sacrifice today’s wants for tomorrow’s needs. Wednesday’s class lecture was about Chile, a country that in many ways serves as a paradigm of economic development in Latin America. Over the past 10 years, Chile has had an average GDP growth rate of 6%. Did you know that since 1981, all new members of Chile’s work force are required to contribute 10% of their monthy gross earnings into a private pension fund account (which they own) ? 14 years later, in 1995, 93% of the labor force is enrolled in such accounts. This has increased the domestic savings rate of Chile to 26% of the nation’s GDP! I just thought this was very interesting considering current talks of social security reform in the United States.