What is savings?

By its history, its forms, its evolution and its differences from one country to another, savings can take on different meanings. We will explain the meaning of this word that we often hear but we do not always know what it means.
At all times and in all ages, savings have existed. From ancient Greece to the present day it is a reality but does not address the same people and does not have the same goal. Very quickly, savings are associated with the currency. Although other forms remain as object or food savings, it is with money that his name will be affiliated. Nevertheless, due to the weak existence of monetization in Ancient Greece and more generally in the Mediterranean world, savings are initially addressed to a small part of the population and often it is the easiest .

This limit of the practice that a reduced fringe of the population will continue until the Middle Ages where it will be able at a moment to be confused with the practice of the hoarding (that is to say to keep his money not to introduce it in classical economic circuits). Saving then has bad press since the Church assimilates it, meanwhile, to greed and it will take several centuries to find a positive character.

It was not until the fifteenth/sixteenth century that savings found a positive connotation although still assimilated to the richest categories of society. It is a century later, in the seventeenth, that savings will extend to the lower classes, especially in Italy

 

But what is savings?

But what is savings?

Coming from the Latin word parsimony, which means saving, saving today means the savings we can make in our lifetime. Be it substantially (when we kept the money for a birthday when we were kids) or more organized (through our bank for example), we save our whole lives.

There are several types of savings that can be grouped into two broad categories: bank investments and financial investments.

Regarding bank investments they are quite known, we can mention the young booklet reserved for 12/25 years. There is also the current account paid, the home savings plan also known as the ELP or the livret A which is the preferred savings plan of the French since there are nearly 60 million in France. Its interest rate is currently 0.75%. These bank investments are considered risk-free short-term investments.

 

And in Europe, how is it going?

And in Europe, how is it going?

Europe is talking about it! The data are very different from one country to another, as are the saving dynamics of each country. They could be divided into three categories.

France, Germany and Sweden manage to maintain a relatively high savings rate of more than 8%. Switzerland, which is not present in the table above, since it is not part of the European Union, is nevertheless the most economical country of the old continent with a savings rate close to 20%.

The second category concerns countries where households have a low savings rate. This is particularly the case in Italy, the United Kingdom, Spain and Slovakia where the rate is less than 4% of disposable income.
Finally, there is one last category of countries where the savings rate is negative, which means that households can not save and lose money. This concerns Portugal, Greece or Latvia.

 

Why such a disparity on the old continent?

Why such a disparity on the old continent?

When we look at the figures, these may seem surprising. How is it possible to have such a difference between countries with a similar standard of living and development?

The high rate of France and Germany can be explained in a cultural way. Since the end of the Second World War, the French and Germans have been saving a lot. As we saw earlier, there are nearly 60 million livret A in France while there are 66 million inhabitants. So, of course, 43% of these A booklets contain less than 150 €, which puts the figures into perspective, but it shows the French people’s attachment to this bank savings account, despite the fall in interest rates.

As far as the United Kingdom is concerned, the explanation is quite different. This is linked to the collapse of purchasing power in the 1990s and the collapse of financial investments following the crises of 2007 and 2010 (this last reason also explains the low Spanish rate). Finally, there is also a cultural reason for the United Kingdom, as for the United States, savings is not necessarily in the mores and we will focus more on the expenditure savings. Finally, we must not forget the correlation between credit and savings, for more information you can go see this article or this Belgian study.

Finally, with regard to negative interest rate countries such as Greece and Portugal, it is the consequence of the financial crises of the late 2000s.

 

What future for savings?

What future for savings?

For France, this will depend mainly on interest rates charged by banks. With a steady decline in the interest rate booklet A and other savings books, putting “money away” has less and less interest. If these rates remain so low then the savings rate of households in France may gradually decline.

From a European point of view, everything will depend on the economic situation from a national and continental point of view. It is not excluded that another economic crisis affects the old continent and causes the same effects as in Greece or Portugal.

The trend that is emerging is a decline in the savings rate at the European level. In particular, the low interest rates but also the fear of investing in risky investments such as the stock market.
It remains to be seen whether this trend will be confirmed over the long term or if it is only cyclical.
In collaboration with Robin Hood Loan Comparator top