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Monday, 16 october 2017 | Redacción CEU
The economic recession years are already behind, but our savings still represent a very small volume. During the crisis, we learned how to tighten our belt, but now that we have begun to overcome it, our personal accounts do not reflect it. The economic improvement that our country experiences should translate into a savings growth, however, as of today, we have only accumulated 6% of our income, what is the reason? Are we doing something wrong? Why are the figures so low?
Retirement, for some people it is really close and, for others, still very distant, is always a matter of concern. Will we get to it with enough money in our accounts? This is one of the big questions that come to our mind at some point in our lives. Even more, if we consider, as the statistics reveal, that we are not good at saving –we have been steadily declining since 2014–. Spaniards have never been big investors, nor good savers. How can these symptoms affect our economy health?
Do we live above our possibilities?
The crisis years were also economic moderation times. Consumption decreased and savings became a priority. In 2009, we reached the record of 13.4% in the savings on disposable income. Us, Spaniards change the course of our personal finances now that the first beams of light after the storm are visible. According to Funcas, consumption is increasing at a rate of 2.7% from the past year, meanwhile the incomes have only increased by 1.5% in real terms.
The economic recovery expectations have had an impact on the increase in consumption – especially, in durable goods–. Consumers are now meeting the needs that in the crisis years they could not satisfy. That washing machine that did not work well, is replaced. They change the clothes line for a dryer. They park the bicycle and the bus to invest in a new car or buy a second hand one. The most daring people sign a mortgage and drop out the renting system. A new formula governs the Spanish economy: to greater economic growth, greater consumption; lower savings.
A hasty reading of the figures may lead us to conclude that well-known phrase of "we live above our possibilities". It is also true that the Spanish society is still paying for the broken dishes of the crisis, like the consequences of indebtedness. With a minimal wage growth and the moderation satiety in consumption, the population see the economic recovery as a relief. Although it is not reflected in its accounts, it does reflect in the rise of its expenses and the payment of its debts.
We do not know about finance
Since our country reached its historic maximum eight years ago, it has experienced a saving fall of almost 20% year-on-year average. Why are our savings so low now? This decline is not only due to the increase in private consumption; the real estate assets have been revalued, the stock market rises, contracted debts are paid, employment is created, interest rates are minimal and consumer loans are more accessible. On the other hand, the general lack of knowledge about financial tools is intimately related to the quality of our savings management.
The PISA report is overwhelming in relation to the education of young people in finance compared to the average of the OECD member countries. Twenty-five percent of 15-year-old students lack basic skills in this area, have little ability to take decisions on simple everyday expenses and have difficulty interpreting a payslip, an invoice or a bank statement. These data are really alarming if we consider that the future of the economy lies in the hands of this generation.
Older people also need to make more effort. Spain is the worst investor country in the five major European economies –among France, Italy, the United Kingdom and Germany– according to the report Evolution of household savings conducted by Finanbest with the collaboration of International Financial Analysts (AFI). In addition, according to The Study of Preparation for the Retirement (2017) carried out by Aegon, only 29% of the Spanish population routinely saves for when they retire. Although the percentage is two points higher than the past year, it is still very far from approaching the European average of 39%.
The mortgaged savings
The report Longevity and changes in saving and investment brings to light a devastating fact, 60% of Spanish families spend more than they earn throughout their lives. The mortgage is the reason for this senseless. On average, Spanish people take 32 years to buy a home –according to a study of the website Kelisto.es–. That population also withstand 32 years of the exponential interests growth. The unshakable 'brick' culture can be an impediment in our ability to save.
Experts point out the investment as an alternative to combat this hostile area for savings. You have to risk for winning and that always involves the danger of losing. The difference between savings and investment lies precisely in the risk assumed. Bonds, State bonds, Treasury bills, corporate promissory notes, shares, investment funds, financial derivatives,... People need to leave their comfort zone to improve their financial situations.
Young generations, like the veterans, are cautious about investing, but they maintain a more conservative profile than these in relation to saving. The effects of the crisis have left a mark and conditioned the millennials, they now have a greater risk aversion. Will they manage to turn these figures around? Do not forget that the future of all, depends on how they save, invest and buy.
Saving is an instrument that allows you to experience a more peaceful and stress-free life thanks to the independence that financial freedom brings. It is easier for an individual who has an economic solvency to fulfill himself/herself at work, because if they do not like it, they will not struggle against abandoning it. The retirement devil is no longer a vulture that overflies the territory. Saving is a good part of the way towards goals and dreams achievement. How much do you save?