The savings paradox: consumption falls but debt keeps rising
Despite consuming less, savings are falling and debt is not shrinking. Low earners with no capacity to save, alongside savers investing up to 51% of their salary.
English · Original discussion in Spanish · Published
Savings in free fall: basic spending and debt absorb disposable income
A press report warned that the savings rate of Spanish households is falling. What is surprising is not the decline itself, but that it is happening while consumption is also shrinking. Even more paradoxical: debt keeps growing. Where is the money going if it is neither spent nor saved? According to the available data, the answer is that what little margin remains is eaten up by bill payments and the need to keep relying on credit to cover the basics.
Two sides of the same coin: low earners who cannot make ends meet and disciplined savers
While a significant portion of the population reports zero savings – "All the money goes on essential expenses: no cinema, no restaurants, no shopping" – another group maintains iron discipline. Savings percentages ranging from 10% of income up to 51% in one particular case are mentioned, on a low earner's salary and living in rented accommodation. A 23-year-old with a net salary of 1,270 euros, living with his parents, has managed to accumulate 22,000 euros in five years, 20,000 of which are invested. Others put between 300 and 500 euros a month towards paying off their mortgage, aiming to clear it in six or seven years.
The disparity is so wide that some doubt the higher figures: "I don't believe there are fourteen people saving between 200,000 and 300,000 a year," one comment reads. The answer is that this is not saving, but capital accumulation. The original survey, by setting annual savings brackets, confuses current saving capacity with accumulated wealth.
To invest or not to invest: the 50% rule and the antiestéticar of debt
Once a cushion of 10,000 euros is in place, most people believe that keeping money in cash means losing purchasing power. Two camps emerge: those who advocate investing in any asset with a return – with criteria such as not financing companies whose debt exceeds 50% of their capital – and those who prefer to pay down their mortgage without taking stock market risks. "Invest, invest, invest... in what?", the sceptics ask, reminding everyone that money can be lost too. The stock market breeds distrust: "I don't touch it, they'd fleece me in two days for sure".
The debate over whether it is better to get rid of the mortgage or invest the liquidity remains open. Some choose to clear the loan as soon as possible; others are waiting "for blood to run through the streets" before buying property, trinc the Rothschild maxim. Meanwhile, mortgage debt keeps weighing heavily: some declare a negative net worth of 80,000 euros after deducting their mortgage.
Savings as a luxury: when making it to the end of the month is the goal
For a significant part of the population, saving is not an option but a luxury. "Household savings are not growing among most Spanish families, that is a fallacy," it is argued. "The average person can barely make it to mid-month, using credit cards for food." The crisis has eroded people's reserves, and the cushion many had built up for independence or buying a home is being used for basic consumption and bill payments. The fact that aggregate savings are falling while debt is not shrinking suggests that, at best, the money is being spent on maintaining a minimum standard of living, not on restoring household balance sheets.
With this backdrop, the picture of Spanish savings offers two irreconcilable realities: that of those who can and choose to set aside up to half their salary, and that of those who do not have a single euro left at the end of the month. The survey, with its bracket limitations, probably underrepresents the latter. The only clear thing is that debt keeps growing and savings keep falling. Finding a single explanation is, for now, an impossible task.
Related discussions in the forum
A press report warned that the savings rate of Spanish households is falling. What is surprising is not the decline itself, but that it is happening while consumption is also shrinking. Even more paradoxical: debt keeps growing. Where is the money going if it is neither spent nor saved? According to the available data, the answer is that what little margin remains is eaten up by bill payments and the need to keep relying on credit to cover the basics.
Two sides of the same coin: low earners who cannot make ends meet and disciplined savers
While a significant portion of the population reports zero savings – "All the money goes on essential expenses: no cinema, no restaurants, no shopping" – another group maintains iron discipline. Savings percentages ranging from 10% of income up to 51% in one particular case are mentioned, on a low earner's salary and living in rented accommodation. A 23-year-old with a net salary of 1,270 euros, living with his parents, has managed to accumulate 22,000 euros in five years, 20,000 of which are invested. Others put between 300 and 500 euros a month towards paying off their mortgage, aiming to clear it in six or seven years.
The disparity is so wide that some doubt the higher figures: "I don't believe there are fourteen people saving between 200,000 and 300,000 a year," one comment reads. The answer is that this is not saving, but capital accumulation. The original survey, by setting annual savings brackets, confuses current saving capacity with accumulated wealth.
To invest or not to invest: the 50% rule and the antiestéticar of debt
Once a cushion of 10,000 euros is in place, most people believe that keeping money in cash means losing purchasing power. Two camps emerge: those who advocate investing in any asset with a return – with criteria such as not financing companies whose debt exceeds 50% of their capital – and those who prefer to pay down their mortgage without taking stock market risks. "Invest, invest, invest... in what?", the sceptics ask, reminding everyone that money can be lost too. The stock market breeds distrust: "I don't touch it, they'd fleece me in two days for sure".
The debate over whether it is better to get rid of the mortgage or invest the liquidity remains open. Some choose to clear the loan as soon as possible; others are waiting "for blood to run through the streets" before buying property, trinc the Rothschild maxim. Meanwhile, mortgage debt keeps weighing heavily: some declare a negative net worth of 80,000 euros after deducting their mortgage.
Savings as a luxury: when making it to the end of the month is the goal
For a significant part of the population, saving is not an option but a luxury. "Household savings are not growing among most Spanish families, that is a fallacy," it is argued. "The average person can barely make it to mid-month, using credit cards for food." The crisis has eroded people's reserves, and the cushion many had built up for independence or buying a home is being used for basic consumption and bill payments. The fact that aggregate savings are falling while debt is not shrinking suggests that, at best, the money is being spent on maintaining a minimum standard of living, not on restoring household balance sheets.
With this backdrop, the picture of Spanish savings offers two irreconcilable realities: that of those who can and choose to set aside up to half their salary, and that of those who do not have a single euro left at the end of the month. The survey, with its bracket limitations, probably underrepresents the latter. The only clear thing is that debt keeps growing and savings keep falling. Finding a single explanation is, for now, an impossible task.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (65 replies).
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