High living costs cut savings rate from 10% to 8%

Households’ savings rate has fallen from about 10% last year to around 8% this year as rising living costs eat into disposable income, economist Thomas Url told ORF’s Lower Austria news service.

Url, an economist at the Austrian Institute of Economic Research (WIFO), said savers’ choices differ by generation. Older people, who tend to have more wealth, are more likely to use savings accounts, while younger people often invest in exchange-traded funds (ETFs) and similar products.

A savings account can be useful for building up money before investing a larger sum, Url said, because buying securities incurs transaction fees. Savings accounts also offer security through deposit protection, while an ETF can lose value. An investment of 100 euros in an account will be returned as 100 euros, he said, but an ETF can fall by 5% to 10%.

Investments in capital markets can offer higher returns than savings accounts. But Url said inflation currently outpaces the interest rates offered on savings accounts, reducing the purchasing power of money deposited there over a year.

Url said uncertainty over wars and price rises had contributed to record savings rates in recent years, as people held back some of their money. However, inflation has made everyday expenses more costly, while households tend to be slow to adjust their spending. The report comes ahead of World Savings Day on Friday.