Taxes rise, savings disappear. A shock is coming, when family budgets take a big hit – Echo24.cz

Table of Contents

• 0.1 Finding balance
• 1 Decrease in savings and increase in debt
  • 1.1 Worried but not a lost generation. How to save childhood
• 2 Another hit: the consolidation package
  • 2.1 Thirty five years ago. The elections in the US and Germany will also change Czech politics
• 3 The costs will not be covered by the minimum wage
  • 3.1 Peter Fiala’s Red Castle. How do the Czechs get?
• 4 Considering the global economic context mentioned in the article, how ‌can the Czech government‌ balance the need for responsible fiscal policy with supporting its citizens through challenging times?

The financial situation of Czech households has deteriorated significantly in recent years. Many face not only a reduction in savings, but also rising living costs and debt. The shock is coming so slowly, because many are slowly running out of financial resources.

A recent study by the STEM/MARK group for the Home Credit company showed that 14 percent of Czechs have no financial resources, and another 17 percent have savings below their monthly household income. . In total, almost a third of the Czech population lives without greater financial security in case of expenses.

“Nearly a third of those surveyed do not even have as much money as their monthly household income for bad times. 14 percent of them have no financial resources at all,” said Home Credit analyst Jaroslav Ondrušek. On the other hand, 22 percent of respondents have reserves covering more than five months of income, which shows that Czech society is very divided in terms of financial stability.

Decrease in savings and increase in debt

Compared to 2023, almost half of the respondents said their savings are lower. 48 percent of those surveyed admitted a decline, while 19 percent improved year on year, often only slightly. Those who do not regularly save any money are still 12 percent. The situation is more complicated with debt – the number of people with regular debts has increased by tens of percent, according to collection agencies.

“In the past year, the number of these people has increased by almost half to 16 percent,” said Fincollect, a company that manages receipts from financial institutions. People often repaying loans with other loans and getting into a debt trap. “Customers often borrow several times to fill holes in their budgets. Usually, short-term loans -time is this, isn’t it they can manage their repayments,” said Redogan company director Radek Pospíšil.

In addition to problems with savings and debt, the situation of households is worsened by the sharp increase in housing, energy and food costs, which remain among the main concerns of Czechs this year as well. Although inflation has fallen from its peak, its long-term effects continue to weigh on family budgets. According to an Ipsos survey for Generali Investments, 18.6 percent of respondents identified rising housing costs as the biggest threat, another 17.2 percent are worried about energy prices, and 16.2 percent are worried about continued inflation.

Another hit: the consolidation package

Since this year, the situation of households has also worsened due to the government’s consolidation package, which has increased taxes and fees. Recently, for example, workers pay health insurance in the amount of 0.6 percent of the total salary, higher income tax affects legal entities, the excise duties on tobacco, alcohol and property have increased, and some tax relief has been limited. “The changes affect all areas of family budgets, at a time when many households have not yet recovered from high energy and food prices,” said economist Jakub Seidler.

At the same time, the tax relief for school and student fees has been canceled for workers, and the self-employed are facing a tax increase. For families, this means an additional burden in the form of lower purchasing power. The property tax, which has risen by 80 percent this year, has hit property owners who are already paying significantly higher maintenance and energy costs.

The costs will not be covered by the minimum wage

For many households working for the minimum wage, the situation is particularly critical. A study by the Institute for Labor and Social Affairs Research showed that the minimum wage in 2023 was not enough to cover basic living needs, including housing costs. “The minimum wage would need to be 36 to 60 percent higher to be reasonable,” the study’s authors said. Although the minimum wage increased to 18,900 crowns this year, it is still behind the average wage and does not cover basic costs.

Economists and financial advisors recommend that families create at least small reserves that could cover unexpected expenses. “If at all possible, you should set aside five to ten percent of your income for unexpected situations,” advises Miroslav Zborovský, ombudsman of Home Credit customers. He pointed out that Unexpected expenses are the biggest problems that cause, for example a breakdown of a car or a home appliance.

Despite improvements in savings and real wage growth, most households are still struggling with economic problems. For many, it is important to improve their financial literacy and gain control over family spending. Otherwise, they risk falling into a debt trap or being unable to cope with unexpected life situations.

“The last few years of uncertainty and rising costs have taught people that every crisis is much more difficult without a financial resource. Now this knowledge must be translated into concrete measures,” said Provident Financial analyst Petr Javůrek.