Europeans saving less, spending more

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25 January 2017

Low interest rates in Europe are putting people’s personal finances under pressure and discouraging them from saving.

Almost a third of Europeans have no savings at all and given the low returns they earn, many are choosing to spend their money rather than set it aside for a rainy day.

These are the findings of the sixth annual ING International Survey into how Europeans save, spend and invest their money. Some 15,000 consumers in 15 countries were polled for the 2017 edition.

It found 29% of European have no savings at all. Of those that do, 36% have the equivalent of only three months’ pay or less stockpiled, leaving them vulnerable in the event of a financial emergency.

With interest rates at all-time lows, there is little to entice people to save. In fact, 41% of savers indicated they are either saving less or are spending that money on everyday household items. Of this 41%, around one in four (24%) is splurging on luxuries like a new car or a holiday.

Reducing debt

On the flip side, low interest rates make it easier to pay off debt. Of the 41% who are saving less, 9% said they had reduced their mortgage payments and 11% had paid off a personal loan.

“Lowering interest rates is a widespread technique for trying to stimulate spending in the economy, but it also has an effect on people’s savings,” said Senior Economist Ian Bright. “We can see that people across Europe are feeling the strain of continued low interest rates, and losing motivation to save, increasing the fragility of many households’ finances.”

Financial worries

The survey found that two in five people are worried about the effect low interest rates will on their savings and 23% worry about the impact on their retirement nest egg. These concerns are leading to worry, frustration and anger.

Despite these concerns, more than half of Europeans (56%) have not changed their approach to saving at all. Behavioural science research suggests that for many it is simply easier to do nothing, even if the return is paltry.

Reluctant investors

A small percentage (17%) have looked at alternative forms of investment, such as shares or bonds. Among the factors stopping people from seeking other ways to make their money work for them are not understanding how investment products work and a natural fear of loss. Four percent invested in real estate and 20% put their money back into their own homes through renovations and improvements.

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