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Saturday 18.01.2020 | Name days: Antis, Antons

Bank: Latvian residents have become more active with making savings

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topical, wages, Swedbank, savingsFollowing increased economic growth, there has been an improvement with Latvian residents’ financial reserves, according to data compiled by Swedbank. Nearly 17% of them have managed to save up money worth three or more wage amounts (2% more than last year), whereas every tenth residents’ savings reach the size of three wages. 7% of residents have no savings at all, according to data from Swedbank.

67% of Latvian residents admit their savings come close to a single average monthly wage amount. Residents also agree the savings-making discipline is gradually improving. 53% of residents say they often make savings for different purposes. 19% of them have managed to allocate more money than before in the past two years. 34% of residents have no noticed any changes with their financial freedom.

«As the economic situation improves, unemployment declines and income increases, the volume of money available to residents has increased in the past several years. Some of this money has been diverted towards making savings. According to data from surveys, one-third of households have experienced an increase of income in the past two years. Every tenth interviewed resident says the amount of available finances has increased for them. This has given residents the option to divert more money to savings (91%),» says Swedbank Insurance and Investments Office head Kristaps Kopštāls.

«It is noteworthy that the residents who have not experienced an increase of free funds because of increased expenses are still able to divert more money to savings than before (38%). This proves residents understand the importance of having savings. Both for short-term and long-term goals savings make life all the easier.»

Savings volume in Riga and regions has not changed much

More residents in Riga and Pieriga are able to afford a safety pillow. This can be explained with employment and options to earn money. Still, the situation in regions is generally similar (14% have managed to create safety pillows). Financial reserve amount has equally grown for residents of all regions (by an average of one percentage point a year).

According to data from Swedbank, the total number of people in Latvia who make savings has increased 5% this year. The difference between regions is relatively small. The biggest inequality remains for annual comparison for regions – from 9% to 28%. Generally, volumes of savings have increased in all regions. The biggest financial savings are recorded in Riga and Pieriga. Among regions, the biggest savings are registered in Kurzeme. It is noteworthy that the most rapid increase has been noted for the number of residents whose savings exceed EUR 5 000 – in Riga and Pieriga there are 36% of such residents, 26% in Kurzeme, 25% in Zemgale and Latgal, as 23% in Vidzeme. The smallest number of residents who make savings is noted in Balvi and Viļaka.

Goals and solutions for making savings

When asked what they spend money on, 47% of resident say they make savings to create a safety pillow. 26% make savings for health services, 25% want to big purchases and afford travel, 23% make savings for home or vehicle repairs, 19% make savings for pension and 18% make savings for their child’s future.

Swedbank data shows that money is more often saved on a person’s bank account (63%), which offers convenient options to access savings. Popularity-wise the next solution is using 3rd level pension plan, which is used by 32% of residents, which proves the necessity for both short and long-term financial reserves. Every tenth resident uses a savings account (12%) and accumulative life insurance (9%).

Read also: Savings of Latvian residents grew by one billion euros last year

Looking at different generations, youngsters aged 18 to 25 years more often make savings on their account (61%), 3rd level pension system (20%), which allows residents to take care of short-term and long-term needs. «One pleasant surprise is that these age groups think about savings for retirement. Young professionals aged 25 to 35 years most often save money on their account (46%) and for pension (22%),» says Swedbank.

It is worth mentioning that as low interest rates remain, there has been an increase with the interest of residents for securities.

The interest is the highest for investments in share and deposit funds. For example, the number of transactions with securities has increased more than 10% in the past year, whereas the volume has increased 50%. Although investment in securities is more popular among men (77%), we can see women are also interested in this investment solution. It is positive to see investment comprehension among residents is on a rise. They understand that low interest rates make money deposited on savings accounts to produce modest increase of deposits. Now residents are prepared to invest in ways that provide bigger profits, the bank explains.

Generally residents divert 20 to 50 euros a month to savings every month, according to data from Swedbank. When asked what they would do if they had 20 50 euros of free funds every month, 30% said they would divert money to savings, 29% would divert money to travel and 29% to health costs.

«Because the economy develops in jumps and drops – one cycle replaces the other – it is worth earning from mistakes to ensure you are more prepared for the next phase of economic decline. One such lesson is making savings in the good times to prepare for economic winter,» says the bank’s representative.

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