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Paulius Morkūnas, chief economist in the Macroprudential Analysis Division of the Bank of Lithuania (LB), notes that households tend to postpone unnecessary spending due to increased uncertainty.
This is evidenced by data from the consumer survey published by the Lithuanian Department of Statistics: this year, the number of those who say that the current time is right for larger purchases is a third less than last year.
It’s unclear what the next one will be like
“Deposits, which grew much faster than in previous years, are in line with this trend. For example, in the first half of this year, household deposits grew by around 563 million. euros. That is, almost three times more than last year and half that in the same period last year.
The uptrend for deposits was particularly accelerated by the uncertainty surrounding Covid-19. In March, April and May, when the strictest quarantine measures were introduced, household deposits in banks increased approximately three times faster than last year or the previous year, ”says P. Morkūnas.
It is not surprising that the growth of deposits, and especially overnight, that is, liquid funds. Residents tend to have liquid funds and this is shown in 2019. Bank of Lithuania Household Survey Results.
Among the reasons for saving mentioned by respondents, the most popular were the desire to have sufficient funds for unforeseen expenses (61%) and the possible deterioration of the financial situation in the future (52%). Therefore, it is not surprising that in the face of a pandemic these trends have not changed ”, explains the LAC economist.
According to him, a similar trend prevailed in Lithuania as in other EU countries. During the first half of this year, deposits grew in all EU countries except Hungary. Calculating the increase from the beginning of the year, household deposits in Lithuania increased by more than 3%. In terms of deposit growth, Lithuania is at the center of the EU, when Estonia led the way, with 8%. increase.
According to P. Morkūnas, there is no clear answer on how household deposits will continue to change in the face of Covid-19:
“On the one hand, the historical data shows that there is a strong correlation between annual changes in wages and deposits. For example, as growth in household income slows, deposit growth may also slow. Especially if the world is hit by an aggressive second wave of Covid-19. A portion of the funds held in banks could be used to repay loans or for consumption.
On the other hand, the variation in deposits may depend not only on changes in income, but also on the consumption and saving habits of the population. 2008 The crisis has shown that a reduction in household income due to an economic shock has led to an increase in the savings rate. Therefore, even with a decrease in household income, the increased need to accumulate a liquid financial cushion will not necessarily reduce household deposits in banks. “
What saves the most money?
Half the nation’s population feels that their finances generally allow them to fulfill their wishes and enjoy life, according to a representative survey conducted by the Swedbank Financial Institute. The study shows that people aged 26 to 45 are in the most favorable financial situation. old population.
“Money is one of the most common causes of stress in adults, so financial well-being can be defined as the concept of financial security and the ability to meet needs and enjoy life. Most Lithuanians say that their financial situation allows them to enjoy life with a lot of stress or not, ”says Jūratė Cvilikienė, director of the Swedbank Financial Institute.
According to her, people aged 26 to 45 have the best assessment of their financial situation. residents of the XXI century of the main cities of the country. It is true that population assessments in other cities and rural areas are not noticeably worse than in metropolitan areas.
“The fact that you do not feel that your financial well-being has developed between the ages of 18 and 25. Young people of age – completely natural. Some of them are still studying, some are just beginning their professional careers. One more year, others and this segment of the population will move to a higher stage of their financial well-being if they strive to secure the best possible education and move up the career ladder. What younger residents need to pay attention to now is their future financial well-being. ” J. Cvilikienė points out.
J. Cvilikienė also claims that as of 2017. 6 percent. a decline in the population who plan finances on a regular basis and those who plan a budget in preparation for a more expensive purchase. The coronavirus crisis has reminded many of the old truth about the importance of planning income and expenses and allocating part of funds to savings and financial reserves.
It is true that the population survey shows that the population, which has not accumulated any financial reserves or has savings that would be sufficient for only 3 months, decreased by 7%. points.
However, the majority of the population had no financial reserve or had a very small reserve, up to 58%. According to a population survey, 72 percent. Lithuanians understood during the quarantine how important it is to have accumulated “financial drops”.
What do Lithuanians save?
Gediminas Milieška, Director of Savings and Investment Services at SEB in the Baltic States, points out from a survey conducted by Baltic Research that the majority (four out of ten respondents who have saved regularly in the last year) accumulate funds for vacations, travel or other entertainment.
A third (31%) save to improve the quality of life, for home repairs, renovations and the purchase of more expensive appliances. A quarter (26 percent) save on a car or other vehicle.
It can also be seen that one sixth (17%) save on medicines or other necessary medical services, 15% savers accumulate funds for the purchase of a house or the down payment of the mortgage. Just over a tenth of those surveyed save their children or grandchildren for education, a computer, or a smartphone. About 8 percent. accumulate funds to invest in yourself, for your studies or development courses.
According to a survey conducted in early June, Lithuanians do not intend to give up the habit of saving for a black day. Almost half (49%) of the savers surveyed indicated that they accumulate funds for unforeseen life events.
According to a survey carried out at the initiative of SEB bankas in June, almost one in two adults residing in the country saves regularly, or 47 percent. surveyed.
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