91% of Latvian residents believe making savings is important. They are also the most conscious among all Baltic States (90% in Lithuania and 86% in Estonia). The desire of residents to make savings is not the only thing that continues increasing, but so does their intention to divert more and more money to this cause. 78% of Latvian residents intend to do that, as opposed to 64% in 2011.
«Experience gained over the course of crises and knowledge of the importance of making savings, as well as their desire to be responsible for their own future and be safe in the event of unexpected developments in their lives forms Latvian residents’ dedication. This is why it is great that the money-saving culture in Latvia remains strong,» – notes expert of Swedbank Institute of Private Finances Evija Kropa.
Residents’ overall theoretical knowledge of the need to make savings and practical approach have both improved in Latvia since 2011. The proportion of residents who regularly divert a portion of their income towards making savings has increased in all three Baltic States. The proportion of savings-makers is the largest in Estonia. Latvia and Lithuania each have a proportion of 68%. It is positive tendency, as Latvia used to have the smallest proportion of savings-making residents among all Baltic States in 2014. Five years ago, in 2011, Latvia was in a situation when the majority of Latvian residents had no financial reserves to speak of, according to study data from Swedbank Institute of Private Finances.
Although the number of savings-makers in society continues to increase, the savings in Latvia are the smallest among Baltics. Bank current accounts, which is the most common option for making savings (chosen by 39% of Latvian residents), most often hold amounts under EUR 1,000. Some residents also make cash savings. Because savings equal to three monthly wage amounts are considered optimal, the average ‘emergency pillow’ created by Latvian residents remains insufficient to suggest residents feel safe.
The popularity of current accounts has increased the most in comparison with other savings options. More complicated financial instruments, such as procurement of securities or cooperation with finance funds, are used by Baltic residents relatively rarely.
Savings are most often made to ensure financial security in the event of so-called rainy days – this response was mentioned by 57% respondents in Latvia, 59% in Lithuania and 65% in Estonia.
«We see that part of the so-called unexpected expenses turn out very expected – child’s graduation, vehicle maintenance and payment of real estate tax are but some of the examples. The trend when a large proportion of society plans its finances in a longer perspective is positive. The proportion of such planners has nearly doubled in Latvia since 2011, reaching 34% in 2016,» – says Kropa.
Diversion of money to private pension funds has become more popular in the past five years (37% this year and 21% in 2011). Although the proportion of savings-makers who perform payments to private pension funds (3rd pension plan) has increased, most of the time residents mentioned using only 2nd level pension plan. In addition, the majority of Baltic residents (especially in Latvia) admit only using 2nd pension plan to ensure financial security for retirement. Four out of ten respondents in Baltic States said they are confident about their pension years, adding they will be able to ensure equal living conditions in the future.