"For the people of Latvia, if we look at the total figure, the deposits in commercial banks, this figure is very large. In total, it is more than EUR 10 billion," said Kārlis Purgailis, Chairman of the Board of CBL Asset Management, a subsidiary of Bank Citadele. He pointed out that in the middle of last year, savings fell below EUR 10 billion, but now the amount of accumulated funds has slightly increased.
"Let's say eight billion of the ten billion euros are held in current accounts or card accounts and are in principle available to citizens immediately. 700 million are held in savings accounts. And €1.3 billion in term deposits, where the most popular term is up to 12 months," Purgailis said.
However, only a tiny fraction of the Latvian population has savings for a rainy day, or a financial safety cushion in case of unexpected expenses, and the overall picture is not encouraging:
"It could be said that up to 20% of the population owns up to 90% of all the saved money."
Reinis Jansons, Head of the Swedbank Institute of Finance, also confirmed the fact that Latvians do not have enough money saved for a rainy day.
"The desire to save is stronger than action. If we look at how many people have sufficient savings, if that can be defined at all, which is usually estimated at three months' income, then about one-third of people in society have such savings. So two-thirds of society do not have this kind of savings. That means that they are at the beginning of the road, somewhere in the middle. It means that a large proportion of people do not have these savings to their full potential," Jansons assessed.
Banking experts agree that people's ability to save money for a rainy day goes hand in hand with their financial capability.
"I think that anyone would want to save at least some kind of cushion, but for most people the income level is still relatively low and the expenses on the other side, for monthly living, for utilities, are very high, so there is no possibility to put money aside," said Purgailis.
If we look at the total financial assets of the Latvian population, excluding real estate and investments in companies, we see that 85% of financial assets are in the form of deposits in commercial banks, Purgailis said.
About 16% of people's financial assets are invested in other instruments that are linked to financial markets: "Latvian government savings bonds have gained popularity in the last couple of years, with about eight thousand people having invested in them, and the total amount is almost €300 million."
