On October 31st of last year, the 99th World Savings Day was celebrated, an important initiative aimed at providing valuable advice and practical guidance for prudent financial management.
On this occasion, the Governor of the Bank of Italy, Ignazio Visco, also delivered a speech dedicated to exploring this topic of great relevance for millions of Italians at the close of his term.
Savings in the Era of Uncertainty
In the 1990s, the ratio of savings to disposable income of families exceeded 20%, but over time, it experienced a significant contraction, reaching 10% in 2019, a figure lower than the Eurozone average.
This decrease can be attributed to the development of the financial sector, which has expanded opportunities for credit access and the redistribution of consumption over the course of life. Furthermore, the prolonged period characterized by low-interest rates has contributed to making financing less burdensome.
In 2020, the explosion of the Covid-19 pandemic globally led to a significant increase in family savings, surpassing 20% of disposable income in the second quarter of that year, concurrently with a contraction in consumption spending.
During 2021, the recovery of the Italian economy has led to an increase in consumption, but savings levels have remained higher compared to pre-pandemic data.
According to Ignazio Visco, Italian households currently maintain a precautionary savings propensity, motivated by uncertainty and downside risks to growth. At the macroeconomic level, factors such as dramatic conflicts in the Middle East and Ukraine, combined with ongoing concerns about inflation, contribute to consolidating this financial caution.
However, the possibility of savings is hindered by significant macroeconomic factors, including persistent low growth, the long-term effects of the energy shock, and restrictive monetary policies adopted in Europe.
The protection of savings
“Savings are also, if not especially a public good,, capable of generating benefits for the community as a whole through the transfer of resources across space, from saving households to entrepreneurs and businesses.
Ignazio Visco
Ignazio Visco’s words highlight the social and public importance of savings.
Savings, instead of being solely a practice oriented towards personal financial security, become a public good that generates benefits for the entire community. This capital reservoir, originating from saving households, can be directed towards entrepreneurs, businesses, and public projects, creating a vital flow of resources to support productive investments in various sectors of the economy, as well as in social initiatives and infrastructure.
Because savings play a crucial role in building a prosperous and resilient society, it is essential to adopt measures aimed at preserving its integrity and ensuring effective use.
The Republic encourages and protects savings in all its forms; it regulates, coordinates, and controls the exercise of credit.”
-Article 47, first paragraph, of the Italian Constitution
The protection of savings, as also stated by President of the Republic Mattarella in the message for World Savings Day, cannot do without adequate regulation and supervision of the financial system. “This implies not only the implementation of clear rules and rigorous controls but also the creation of a strong, transparent, and stable financial environment.
However, the protection of savings cannot be limited to mere legislative regulation.
It is necessary to engage more broadly, creating optimal economic and financial conditions to ensure efficient use of saved resources: when accumulated capital is directed towards productive investments, virtuous dynamics are triggered, stimulating economic activity, generating employment, and income.
This positive cycle, in addition to benefiting the individual saver, contributes to collective well-being, fostering sustainable economic growth over time.
Why seek financial advice?
“While investors have largely overcome the shock related to the COVID-19 pandemic, uncertainties arising from the current policy crisis and market volatility make savers feel more uncertain and less prepared for complex investment decisions, and therefore, more receptive to advice and guidance.
Giovanni Andrea Incarnato, EY Italy Wealth Manager
The intricate dynamics and market uncertainty are influencing the expectations and investment choices of savers, making the financial decision-making process more complex and increasing the perception of a lack of adequate financial education.
This has led to an increase in the number of Italians turning to financial advice to face the challenges of an increasingly complex financial environment.
According to the EY Global Wealth Research Report 2023, 57% of Italians, compared to the European average of 48%, now consider it essential to rely on a professional for investments
By collaborating with experienced consultants, savers can benefit from personalized strategies that take into account their specific needs, aspirations, and long-term financial goals.
However, the role of the financial advisor goes well beyond mere technical expertise, extending to the management of emotions and expectations.
In times of economic uncertainty, individuals can easily be swept away by panic and fear: it is the task of the financial advisor to provide their clients not only with proper financial expertise, on the functioning of markets and the nature of investment strategies, but also guide them” rationally through the emotional challenges that inevitably may arise.
Through open dialogue and a relationship of mutual trust, the financial advisor helps clients stay calm during periods of uncertainty, avoiding impulsive decisions that could significantly compromise the success of the savings plan.
Only with this collaboration and consolidated trust, the client can embark on their savings plan with clarity and serenity, significantly increasing the chances of success in achieving the predetermined financial goals.