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Ceturtdiena 19.07.2018 | Name days: Jautrīte, Kamila, Digna
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Swedbank: savings of Latvian households – unprofitable

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUWhile Latvian households’ savings to form an emergency financial safety pillow continue to gradually grow, residents remain largely sceptical about creating long-term savings and deposits.

Given the fast that interest rates remain low on deposits, households should reconsider their plans for the future, especially if they include making savings for some specific goals – paying first housing instalment, savings for child’s future, pension plan or some yet unspecified goal, as noted by Swedbank Institute of Personal Finances Director Adriāna Kauliņa.

An increase in households’ income is currently noted in Latvia. The will to spend money grows as well. This is reflected in growth in retail trade and results of a recently carried out survey of public opinion. 68% of residents are currently able to divert additional money on some significant purchase plans. However, only 37% of Latvian households make savings. Latvian households’ level of savings is the lowest among Baltic States – 31% of GDP. That of Lithuania and Estonia is 36% and 42% respectively. It is the lowest index in Europe, where household savings reach 160% of GDP.

Kauliņa says making savings is important not just for overcoming difficult financial situations but also for realising different plans for the future with as low dependence on loans or support from the state as possible. This especially applies to pension plans.

According to information of the Financial and Capital Market Commission, 64% of Latvian households keep savings on their bank accounts, savings accounts or different deposits. According to Eurostat’s compiled data, the situation in the EU is different – 60% of deposits are made in the form of deposit funds, securities and insurance, which are all mostly long-term deposits.

Households’ investments in the so-called emergency safety pillow slowly grow in Latvia over time. According to data of FCMC, households’ deposits grew 7% over the course of 2009-2013. The increase of households’ savings in deposit funds, securities and insurance was only LVL 95 million in the same period. Level 3 pension plans and life insurance with savings have been growing the most in Latvia these recent years. This type of savings is supported by state policy, which allows residents to recover 24% of their payments in private pension funds and deposited life insurance amounts that do not exceed 10% of gross salaries.

The creation of an emergency safety financial safety pillow will always remain a priority for households. However, it is worth diverting at least some part of that money for long-term deposit plans. There is not much money available for Latvian households to divert for savings and deposits, but it is the long-term deposits that turn small amounts into emergency savings, Kauliņa concluded.

Ref: 102.109.109.9928


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  1. J. says:

    Tip to Swedbank: No one wants to save at your miserable 0.1% interest rate.

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