Peter Bosek, the Erste Group management board member responsible for retail banking, warns on relying too much on traditional savings products for longer-term financial health: “Because they continue to focus so heavily on savings books when putting money aside, banking customers in Austria have just in the past year alone lost the equivalent of almost 5 billion Euros due to inflation and the next to non-existent interest rates for savings – that’s a negative return of 1.6 percent. The comparable ‘loss’ for savers in the Czech Republic, Slovakia and Hungary also added up to some 3 billion euros in 2018.”
Bosek adds: “Exactly 200 years ago, Erste provided its very first client with a savings book, helping her to build up prosperity within her lifetime. But with the interest rate environment in Europe set to continue at extremely low or negative rates for the next five or ten years, people in our region will need to stop relying so heavily on simple savings products. They need to instead look into other means of safeguarding the value of the money they manage to put aside. If they fail to do so, they’ll find it ever harder to achieve and maintain financial well-being, especially in their old age.”
People in CEE generally still wary of investment markets
The investment culture in CEE has made some progress in recent years, but the willingness of people in the region to actively invest their savings remains underdeveloped, especially compared to the USA, the UK or Scandinavia. Even in those CEE countries whose respondents were the most open to undertaking investments (Slovakia, Romania, and the Czech Republic), only 1 in 5 respondents said that they had bought stocks, securities, funds or bonds to protect themselves from low interest rates on deposits and savings accounts.
Since 2014, the survey participants’ willingness to invest in stocks or bonds has risen notably in the Czech Republic, Slovakia, Romania and Serbia, but decreased in both Hungary and, in particular, in Croatia. Even with the general upswing this approach to financial planning has enjoyed over the past few years, it remained less popular than buying a life insurance, giving money to children or family members, buying an apartment, placing money into long-term deposits, or even keeping savings on their current account.
The largest share of CEE respondents took a neutral stance on the merits of investing money into stocks, securities, bonds, or funds. However, across almost all CEE countries (Croatia was the sole exception) the share of those who regard such investments as “very or rather positive” was higher than that of those who have a “very or rather negative” view of them. Romanians were the most positively inclined towards such investment products (42% viewing them as “very or rather positive”), followed by Serbians (31%), Slovaks (28%) and Czechs (27%). However, this level of positive inclination remained much higher than the share of those people who have actually bought stocks or bonds.