38% of Spanish families reduced their savings due to Covid19, according to the Observatorio del Ahorro Familiar (Observatory of Family Savings)

Prior to the health crisis, two thirds of Spanish households said they set aside part of their income for savings, but the pandemic caused 38% of families surveyed to reduce the amount they saved, although this was lower among households whose income has been reduced as a result of the crisis: 53% in this group would have reduced their savings during this period compared to 29% of unaffected families.

These are some of the conclusions of Determinants of household savings: financial education, the protagonist, a report that lays out the results of the second study carried out by the Observatorio del Ahorro Familiar (OAF), sponsored by the Fundación Mutualidad Abogacía and the IE Foundation, presented today at IE University’s IE Tower. The research explores the factors that influence household savings, particularly in the context of two major crises in little more than a decade, which have highlighted the importance of savings in household economies to protect against adverse circumstances. Blanca Narváez, director of Fundación Mutualidad de la Abogacía, stresses: “Household precautionary savings are an indisputable pillar of the welfare state as they are the only way to protect the financial health of families in the face of economic crises and other unforeseen negative events. The OAF has carried out this study because we believe it is essential to understand the reasons that lead people to save.”

This study explores how the crisis resulting from the Covid-19 pandemic has impacted the savings of Spanish households and how this experience may condition the future behavior of families.

Regarding the outlook for Spanish households in terms of precautionary savings-consumption, between 60% and 70% of those surveyed do not plan to change their behavior as a result of the crisis. Of the remainder, twice as many households (most of them economically affected by the Covid-19 crisis) are inclined to moderate consumption. Laura Núñez, director of the OAF and professor at IE University, says: “In light of the results of the study, it is most likely that in the immediate future we will see more responsible consumption and that savings rates will be higher than the minimums we recorded in the years prior to this crisis. However, given the steep fall in consumption in 2020 of 12.4%, much higher than the fall in GDP (10.8%), consumption will also register significant growth as the situation normalizes.”

DETERMINANTS OF SPANISH HOUSEHOLDS’ SAVING BEHAVIOR

This second OAF study also analyses the impact of factors of a more structural nature on household saving, such as the influence of financial literacy, families’ socio-economic level, or how the life cycle and where they reside affect it.

For example, the study shows that the savings rate of Spanish households approximately doubles when they have a basic economic education. Thus, 80% of households with this type of education dedicate income to savings, in contrast to the 40% of households without this education. This figure is particularly relevant given that almost 90% of Spanish families have no knowledge of the different investment vehicles at their disposal to manage their savings, while 44% lack any basic economic-financial knowledge. “The study shows the positive impact of financial education on households’ savings rates and highlights the importance of devoting time and resources to providing the public with financial education. It is an indispensable tool to guarantee their present and future economic health,” says Blanca Narváez. In addition, according to this research, a fifth of Spanish families believe they have a basic understanding of economic-financial knowledge, when they don’t. Again, a quarter mistakenly believe they know about investment assets.

At the same time, the results indicate that the socio-economic level of the families, although influential, is not totally decisive in their attitude to saving, since there are families at all levels that save and others that do not, although the segment of households that do not save at all is much higher among lower-income households (54%) than those with greater income (28%). The same is true of the impact of the life cycle on household savings, given that, according to the study, in all age ranges there are at least 27% of households that do not save at all, although it is the youngest (20-24 years) and the over-65s who save the least (38% and 45% of households, respectively).

In relation to how the place of residence affects the attitude of Spanish families towards saving, the research reflects some differences in households in different areas of the country. For example, households in the Southern Zone/Andalusia and the Canary Islands save less, once adjusted for the socioeconomic level and extent of aging of the population of Spain’s different regions. “This could be due to differences in the institutional and cultural environment of the regions in terms of specific public and social policies and differential taxation, among others,” explains Laura Núñez.

REASONS FOR HOUSEHOLD SAVINGS IN SPAIN

This OAF study includes an investigation into the reasons that lead Spanish families to save, so as to identify households’ savings priorities. The main reason is to guard against the impact of unemployment or a sudden change in circumstances, cited by 40% of those surveyed, with no differences between income levels or age ranges.

This is followed by saving for a pension (13%) and to pay off debts or loans (12%), but there are differences depending on the variables mentioned above. Thus, for example, in households with savings of less than 25% of their income, a pension is the second most important, while for those who save more than 25% of their income, it is the purchase of a home. In relation to age ranges, for people aged between 20 and 44, housing is the second most important reason for saving, and in the over-65 age group, bequest acquires a special prominence: 10% of families in this age group indicate this as the main reason, a figure that is five times the percentage of some of the other age segments.

“Education as a priority reason for saving is chosen by 16% of families with children under 15 years of age, a figure that is three times higher than that observed for households without children.”
Laura Núñez, Director of the OAF and professor at IE University

METHODOLOGY OF THE SECOND FAMILY SAVINGS OBSERVATORY STUDY

The analyses presented in this report are based on a survey designed by the Observatorio del Ahorro Familiar, the field phase of which was carried out by Netquest online between 10 and 24 March, 2021. The sample of 1,501 individuals is representative of the Spanish population with internet access by gender, socioeconomic level, age in the range 20-74 years, and geographical area. The response rate was 69%, and the margin of error is 2.5% for a confidence level of 95%.

In addition to relevant information on the financial behavior and attitudes to saving and investment of households before the onset of the pandemic and on the impact of the pandemic on the financial attitudes and behavior of households now and in the future, the survey includes data on numerous socio-economic characteristics of the respondent and their household (gender, age, level of education, employment status, professional sector, household members, children under 15 and dependents, level of household income and wealth, and ownership of housing, mortgages and consumer loans).

In this link you can access the full report of the second study of theObservatory of Family Savings.