BarcelonaThe savings accumulated during the pandemic are normalized. The gradual reopening of the economy from the spring of last year, first, and the increase in family spending due to the increase in the cost of living, then, have evaporated much of the money accumulated by families during the two years of covid, which were mostly concentrated among households with higher incomes.
Family savings in Spain
Proportion of savings on the total gross disposable income of Spanish families. Quarterly data in percentage.
In total, the Bank of Spain estimates that, between the beginning of 2020 and the third quarter of 2022, Spanish families saved around 269 billion euros. “Spanish households accumulated a very abundant savings bag during the phases of greatest incidence of the pandemic,” indicated the deputy governor of the institution, Margarita Delgado, on February 1 at an event in Madrid. Physical confinements and restrictions on restaurants, shops and tourism reduced consumption and allowed citizens to have more money available to save.
The savings data collected by the National Institute of Statistics show this. Between 2007 and 2020, the percentage of family income allocated to savings in Spain was, on average, between 5% and 10% each quarter. The figure, however, had already risen to 12.7% in the first quarter of 2020, when the first lockdowns were declared, and shot up to 25.1% between April and June of that year. Since then, the rate moderated, but remained above 10% until the first quarter of last year.
With the almost total reopening of activity, especially tourism, commerce and restaurants, it returned to 5.7% in the third quarter of 2022, the last with available figures. In fact, this is the first reason why this pocketed savings has been falling apart, but it is not the only one.
196.000 M€
Savings accumulated in Spain by families between January 2020 and September 2022
Another cause is the rising cost of living. “The high inflation rates observed since the latter part of 2021 are translating into consumption growth,” Delgado explained, a fact that is “diminishing” household savings levels. In other words, since the prices of the products and services they consume in their day-to-day life have increased, families have to allocate a larger part of their income to everyday expenses – such as food, energy bills, clothes or fuel – so they don’t have as much room to save or, in some cases, even have to spend some of the money they had been able to accumulate during the covid years.
A lot of accumulated savings among high incomes
The two years with the most savings were the first two. In 2020, a savings of 113 billion was accumulated, of which 74 billion was cash and bank deposits and about 42 billion was used to buy a home. In 2021, on the other hand, investment in housing rose to 54 billion and investment in financial assets was 72 billion, but this time with the difference that it was not mainly money and deposits, but 33 billion was allocated to investment funds. As for 2022, although the data for the full year is not yet available, the Bank of Spain detected “a context of moderation in savings”.
From the outbreak of the pandemic until last September, therefore, the financial assets in the hands of Spanish households increased by 196,000 million euros, according to data from the monetary body. Of this figure, approximately 77% was accumulated as cash or bank deposits. The rest, about 50,000 million, was allocated mainly to investment funds.
This indicates that the distribution of savings was uneven depending on the households. “A very high proportion of the extraordinary savings bag accumulated during the pandemic was concentrated in the highest incomes,” Delgado said. In fact, among the 10% of the population with the lowest income in Spain, only 3% have money in investment funds, while this figure rises to 22% in the case of the 10% of the population with the highest income.
According to the Bank of Spain, families with low salaries were more affected, as a whole, by the stoppages of activity, since many are concentrated in services such as restaurants, commerce or tourism, or are face-to-face, such as now in industry and construction. So, although ERTEs avoided a collapse in income for the majority of the population, these families had less room to save. On the other hand, people with higher incomes work proportionally in jobs that were better adapted to the situation and where it was easier to impose telecommuting.
In addition, in the following months, both inflation and the reopening of leisure and dining have affected families with higher incomes less, as they allocate a smaller proportion of their money to these activities.