There is reason to hope that one of the trends of 2024 will be the return and strengthening of the habit of saving, says financial expert Jelena Novak.
Savings compensate for inflation
The money saved by citizens is the main resource that helps offset the high inflation of the previous two years. The survey conducted in Latvia shows that 28% of the population have started spending their savings, and this spending is related to both inflation and the population’s desire to invest money. Sometimes reserves are used to pay off liabilities faster. Basically, savings spenders are young people (18-35 years old), who have been saving for a relatively shorter period of time and had less start-up capital. It is worrying that more than a fifth of people do not make any savings, while 15% of people’s savings would be enough for no more than one month. For about a third of the population, the level of savings would allow them to compensate expenses for three months or more.
A third feel stable and expect an increase in income
How financially stable do people feel right now? The “Financial Security Index” survey conducted at the end of last year shows that 39% of people are dissatisfied with their financial situation, while 35% assess it as generally good. About a quarter (24%) of people have a neutral rating, most of them are residents aged 50 and over. On the other hand, 12% are very dissatisfied.
When assessing how the financial situation will change this year, 41% of people allow an increase in expenses, while 28% are full of optimism that their income will also increase. The number of pessimists regarding their income is 17%, while 14% hope for a decrease in expenses. 30% believe that expenses will remain unchanged, while 39% do not expect any changes in their income.
Deposit rates are rising, but deposits are lagging
Last spring, banks began to significantly raise rates for various types of deposits (for example, the rate for a one-year time deposit in our bank is currently 3.7%). However, last year, only about a third of our customers diverted their free funds to savings accounts and time deposits, while the remaining free funds are still kept in ordinary accounts, so the opportunity offered by banks for increasing capital is not used. In general, the growth of time deposits and similar deposits was also very slow at the end of last year, according to data from the Bank of Latvia.
Most likely, saving and saving money does not go so well, because during the long period of so-called negative rates, people have lost the habit of diverting money into a profitable deposit, but very young people have not had such experience at all. It can be predicted that this year we will see that part of citizens’ free funds will move to financial products with higher yields, including investing money in financial markets. In addition, taking into account the expressions of the European Central Bank and market expectations, this year we can expect a decrease in rates, so it can be said that there is still a good opportunity to take advantage of the higher value of deposit rates.
Higher interest rates are a good opportunity not only to earn by putting free funds to use, but also to create a valuable habit – to gradually accumulate money for the next unpredictable moment of crisis.
2024-01-14 10:30:00
#year #Latvian #residents #entrust #money #banks #VIDEO
