The Polish wallet – mainly empty and full of holes

Seneca once wrote, “It is too late to spare when you reach the dregs of the cask.” This also goes for the finances of Polish households. They want to save, and even know they should, but they’re just unable to do so

By Sergiusz Prokurat

According to statistics from the European Central Bank, the average deposit amount per Polish citizen in 2013 was €3,400, that is around PLN 14,000. But that’s over two times less than the average for Czechs and eight times less than the equivalent number in Belgium or the UK. What’s more, the distribution of the saved amounts is very unequal among households. Six out of ten Poles do not have any savings at all. They live day to day, not creating any financial security for the future.

[big percent= "PLN 14,000"]The amount of the average deposit per Polish citizen[/big]

Why aren’t Poles saving more? The simple answer is that they don’t have anything to save. “Earnings in Poland are a couple times lower than in Western Europe. Meanwhile, the prices of goods and services are comparable, and that’s why saving in Poland is a real challenge,” Aleksandra Jezierska, who works at a Warsaw-based corporation, said. “Your income is just enough for ongoing consumption, and you’re left with no additional funds you could set aside for the future. This is especially the case for young people who want to make it on their own, but they’re often unable to earn enough to save after subtracting all current living costs,” Marek Szulgowicz, a student at one of Warsaw’s universities added.

Apart from barriers of an economic nature, such as low GDP per capita in comparison with Western Europe, there are also psychological barriers. Some Poles lost their savings during the inflationary years of the 1980s and 90s, which is reflected in a distrust towards saving in general. Furthermore, according to professor Dominika Maison, the author of the book entitled “Polak w świecie finansów” [Poles in the world of finance], the state took care of citizens for many years during the socialist period, thereby lowering incentives to act. “In Poland, you don’t have a widespread custom of taking responsibility into your own hands,” Maison added.

Who saves in Poland and how much

The Social Diagnosis 2013 report is a study which included over 12,000 households and 26,000 survey participants. The report from this study shows that only 40.8 percent of households have any savings at all. The most acute lack of savings can be observed among disability claimants (nearly 80 percent of households have no savings), those living on unstable financial sources (over 75 percent) together with single-parent families and families with many children (71 percent and nearly 70 percent respectively). Most households have savings amounting to 1-3 times their monthly income (31 percent). The 3-6 monthly multiple range of savings is held by 23.4 percent, while only 12.8 percent of survey participants had savings worth more than half their annual salary. Even worse, only 6.4 percent of households have more than a year’s salary worth of savings, out of the entire group of households declaring any savings. Polish families usually save using term deposits (around 43 percent of savings is held in this way). Saving is treated as an insurance policy for old age (19 percent of savings), unforeseen situations (18 percent), or is used for the specific purpose of buying an apartment or a house (10 percent) or insuring the future of children (9 percent). [big percent= "40.8%"] The number of Polish households that have any savings.[/big]

It’s time to start thinking about our finances

Despite the problems tied to accumulating savings, the number of people putting away some funds is on the upswing. As recently as four years ago, only one-third of the society had savings. Poles mostly saved for unforeseen events and for their mortgage, which was easier to come by before. New regulations in 2014 imposed an obligatory 5-percent equity contribution for a person wishing to take out a loan. In 2015, the loan-to-value ratio will further decrease to 90 percent, in 2016 - to 85 percent and finally in 2017 - to 80 percent. This shows that Poles are aware of the importance of having an adequate financial cushion. However, declarations are not always translated into reality. The propensity to save will surely rise in Poland. Extending the retirement age and news about the demographic tsunami which will overload the Polish pension system are strong incentives to save.

Poles don’t always know how to save. “Although people differ a lot between themselves, saving is due to the views one holds, the ability to exert self-control, and one’s level of education. You can learn how to save,” said Maison. The problem of Polish society is inadequate knowledge about the possibilities they have for managing their personal finances. Despite the fact that the pros of financial education are significant, only two-thirds of savers entrust banks with their money.

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Most households have savings amounting to 1-3 times their monthly income (31 percent). The 3-6 monthly multiple range of savings is held by 23.4 percent, while only 12.8 percent of survey participants had savings worth more than half their annual salary.

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It’s still very popular to keep money “under the mattress” – a large group of Poles still prefers using cash only, exhibiting high levels of distrust towards tools with higher risk. Citizens of Western Europe are much more accustomed to using riskier investment devices, such as investment funds or equity markets, but this difference may be due to the fact that they have more funds to invest and may absorb potential losses easier than the average Pole, who would be left without much financial cushion.

It can only get better

Although the Polish society is still not that knowledgeable about saving and doesn’t have the possibilities and incentive for accumulating capital, Poles do show much enthusiasm for action. Knowledge is also a form of capital, and in the last 25 years Polish society has seen a true transformation, going from a country where foreign languages were unheard of to an educated, informed society, which expects further institutional change and development. “Faster economic growth raises the savings rate among households,” said economist Aleksander Łaszek. This should be helped by reforms – raising the labor participation of the Polish society, especially among women and older age groups. Pecunia non olet – money doesn’t smell, as the ancient Romans used to say. Soon you may not have to be Caesar to save in Poland.