Few coins in the piggy bank

Few coins in the piggy bank

Monday, 5 november 2018 | Redacción CEU

Problems when managing unforeseen events, difficulties to materialize medium or long-term plans, the impossibility of paying bills on time, trouble bringing projects to life, the inability to increase capital through smart investments, etc. Not keeping enough money in the money box entails having to face big obstacles sooner or later. This is not a minor issue and, therefore, deserves a lot of attention. However, managing to increase the savings rate in Spain is still one of the great pending issues of the country. Why is it so difficult for Spaniards to save?


The fact that Spaniards have little money saved is nothing new. As we remarked in an article last year, Spaniards save little, and there is even a downward trend. The report "Analysis of savings and investment decisions of Spanish households" that was published in October by the CNMV (National Securities Market Commission) confirms the trend. CNMV's study reveals that the Spanish savings rate represents less than half of the European average. The Spanish gross income, which is calculated from the difference between the gross disposable income minus the final consumption, is 5.1%. That figure is really small compared to the 12.13% average which is recorded in the Eurozone, 17.3% in Germany, or, 13.7% in France.

The Spanish savings rate has always been lower than the European one, and its trend has generally pointed downwards. Only when the crisis started was a strong pickup recorded. That increase came to reach a record high of 13.4% in 2009. Even at that time, the figure was not high enough to match the European average. Facing such a difficult economic scenario, Spaniards decided to resort to saving as a preventive and protection measure. However, when the hardest years of the crisis were left behind, the country's savings kept experiencing a gradual decline once again. Why are the Spanish money boxes empty again?

What do other studies say about Spanish savings?

Ofertia, an online sales platform, has recently presented the results of its survey which was carried out on the occasion of the World Savings Day. According to them, the economic problems are, along with health, the main concerns of the Spanish people. This fact has been corroborated by the high percentage of respondents who claim to be unable to save money with their current salary, specifically, 71% of them.

Another study by Rastreator, a search aggregator of insurances and mobile network operators, which was also carried out on the occasion of the celebration of this day, points out that 7.97 million Spaniards (a figure that represents 26.7% of the population) do not manage to save anything at the end of the month. In turn, this report claims that the number of savers in Spain has fallen by 13.5% over the last year. According to its analysis, the lack of income is the great obstacle to saving (48,8%). Other reasons that explain this situation are: expenses in contingencies (36%), indebtedness (14%) and economic support to third parties (13%). 19.4% of respondents admit that they spend more than what they earn and 19.8% confess that the reason why they do not save, or do not save more, is they prefer to allocate that money to whims.


Few coins in the piggy bank

The real estate savings, a Spanish hallmark

Debt, the housing bubble, a rebound in the bet on consumption, salary limitation and lack of financial knowledge are major obstacles that explain the low savings capacity in Spanish households. However, one of the most significant factors that have marked the course of the family economy in this country is the investment in real estate. In Spain, people bet on real estate savings, not on the financial ones.

The level of wealth of families in Spain is higher than the European average. This only responds to the greater weight that real assets have in this economy. While its financial component is 18%, real estate represents 82%. Spain is far away from matching the European average in which real estate wealth accounts for 68% while the financial aspect takes the remaining 32%. Spaniards continue to rely on tangible assets and not on other financial assets such as pension funds, variable incomes or insurances.

The so-called “brick culture" is still very present in Spanish society. Nonetheless, this does not mean that its risks are minor: liquidity problems, limited labor mobility and excessive indebtedness. Regarding this last aspect, the aforementioned report of the CNMV holds that, before the crisis, Spaniards got into debt a lot more than the rest of Europeans. The hidden reason behind this fact was mainly the acquisition of non-financial assets, in particular, housing. Along with the reduced rents and the new bet on consumption (which was postponed during the economic recession), this is one of the best reasons that explains the current lack of liquidity.

This pattern of investment and savings of the Spanish economy may contribute to reduce its growth capacity and cause the rise of the financial imbalance. It should be also noted that the importance of financial assets in the portfolio of Spanish households has increased, although only significantly in the households with higher incomes. Also, although in a timid way, the bet for real estate assets has declined. The latter is explained by the difficulty of younger families and with lower incomes to access housing investment. As a final and relevant fact, Spaniards are starting to be interested in investment funds.

At The CEU IAM Business School we are fully aware of the fact that both large and small companies need to count on professionals who are backed by a sound financial training. For that reason, we have designed our Executive Master's Degree in Finance: a training that will help you acquire a complete view of the financial world and become a great expert in this sector.