12.10.2017

Study: Amount allocated to savings increases, while degree of satisfaction stagnates

Average amount allocated to savings increases to EUR 239
If just 10% of deposits had been invested in stocks, EUR 4 bn. in additional returns would have been generated
Every second respondent is interested in ethical and sustainable investments

Savings book remains top choice

It appears as though Austrians have become used to the fact that for many years, interest paid on savings deposits has been significantly below the inflation rate. Despite this fact, savings accounts remain the most popular form of saving among Austrians. 76% have money deposited in savings books; in 2006, when IMAS conducted the first representative survey on behalf of Erste Bank und Sparkassen, the percentage was actually 5% lower. Every second Austrian simply leaves his money in a current account (46%). Six out of ten respondents have a building savings contract (+5), but a respectable 29% (+15) are holding securities as well. The percentage of people who don't save at all stands at 6% (-2). Saving is traditionally quite important to Austrians: with 75% the percentage of savers exceeds the 70% level for the first time in two years. But what are Austrians actually saving for? The main purpose remains creating a reserve for emergencies, so as to be financially secure (82%). The following factors have changed significantly since 2006: “In order to be able to afford something” has become a decisive driver for 41% (+17). 39% (+18) want to save “for renovations” and 30% (+16) cite funding of “small purchases” (such as a PC, a TV set, etc.).

The amount allocated to saving currently stands at EUR 239 per month, in 2006 this amount was just EUR 132. Although the amount has increased by more than EUR 100, only 51% (+1) of Austrians are happy with it. Thus the degree of satisfaction basically stagnated, despite the increase in monthly savings allocations. “If one saves with the aim of being able to afford a purchase at a later point in time, one definitely has to look beyond the savings book”, says Thomas Schaufler, chief retail officer at Erste Bank Oesterreich.

Thomas Schaufler, chief retail officer at Erste Bank Oesterreich ©Daniel Hinterramskogler

Only 10% of deposits invested in stocks – which would have returned an additional EUR 4 billion

More than EUR 260 billion of the monetary wealth of Austrians consists of deposits and cash and is primarily deposited in savings books or current accounts. If Austrian savers had shifted just 10% of their almost entirely yield-bereft money into stocks, they would have earned an additional return of EUR 4 billion since 2013.[1] “It is clear that stocks are associated with greater risks. However, failing to take action as an investor, means low interest rates and rising inflation will destroy the purchasing power of money parked in accounts”, Schaufler notes. No ECB rate hike should be expected in the near future. Analysts at Erste Group envisage such a scenario at the end of 2018 at the earliest, provided economic growth in the euro area continues to be strong. Even in that case it will take a number of years before interest paid on savings will approach levels close to the inflation rate again.

Ethical and sustainable investment attracts ever more interest

One form of investment increasingly piques the interest of Austrians: Ethical and sustainable investment. Every second respondent knows what the term designates, but only around 4% actually own products of this type. Interest in the subject is nevertheless very high: 45% consider such investments interesting; in 2011 only 36% believed they were potentially worthwhile. Heinz Bednar, head of Erste Asset Management attributes the large discrepancy between these expressions of interest and actual ownership of such securities to the fact that there is still a dearth of knowledge about securities among many investors, who are consequently reluctant to invest in global stock markets.

With respect to ethical and sustainable investments, Erste Asset Management employs an integrative approach in its investment process, which takes social and environmental factors into account, as well as the quality of management. Exclusion criteria comprise inter alia proscribed weapons, nuclear power generation, arms manufacturing and/or arms trading. Companies that make use of child labor, violate human rights or workers' rights, or are involved in corruption, etc., are also off limits for investment purposes.

Most Austrians (55%) believe that ethical and sustainable investments generate similar returns as any other type of investment. A large majority of investors (66%) would even be prepared to accept lower returns in order to ensure that their funds are sustainably invested. “They don't have to though”, says Heinz Bednar. “Numerous international studies confirm that responsible investment and good returns are not mutually exclusive. People who invest sustainably, tend to be more thoughtful. What happens with my money? What added social and ecological value can it achieve?”, Bednar notes.

Inflows into sustainable investment funds increase strongly

Erste Asset Management currently has around EUR 4.5 billion in assets under management in its ethical and sustainable investment funds, which makes it the market leader in Austria. In 2011 AUM in this segment amounted to just EUR 2.4 billion. “That represents 90% growth, which shows the strong momentum at which interest in the segment has increased among private and institutional investors”, Bednar states. With more than 15 years of experience, Erste Asset Management counts as a pioneer in the sustainable investment sector.

Bednar further: “From my perspective the two sustainable equity funds we offer are particularly interesting at the moment.” ERSTE REPONSIBLE STOCK DIVIDEND (AT0000A1QA79) invests globally in stocks of companies which are engaged in sustainable activities and offer an attractive dividend yield. The second equity fund, ERSTE WWF STOCK ENVIRONMENT invests exclusively in companies in the environmental sector, which includes activities like water treatment, recycling, renewable energy and mobility. Over the past five years the fund has returned 10.9%, since the beginning of this year it has gained 5.0%.

Allocating savings on a regular basis to investment funds is a promising long term strategy. By making regularly curring payments into an investment fund savings plan, one can take advantage of the volatility in financial markets by obtaining better average entry prices, which enables one to gradually accumulate wealth. “For instance, with the sustainable s Fund Plan Mix, one can comfortably invest in several ethical and sustainable funds concurrently, and benefit from the profit opportunities offered by international capital markets. This can actually be done with just 100 euro per month”, Bednar says.

^{[1] Source: based on household wealth as calculated by the OeNB (time period 2013 – 2017/Q2) and own calculations}