How people’s emergency stocks were affected by the outbreak
According to a survey, the uncertainty caused by the epidemic has prompted many people in Hungary to start taking out life insurance or other long-term investments. At the same time, however, there are many who have been unable to increase their existing savings or have even had to dip into them because of the fall in income.
A mixed picture of self-sufficiency in Hungary at the end of 2020. On the one hand, the COVID epidemic and the subsequent economic recession have made many people aware of the importance of saving, and those who have the opportunity to do so are trying to reduce their spending and increase their assets in bank deposits or long-term savings vehicles. At the same time, however, households’ financial situation and ability to save have deteriorated and the overall amount of savings has fallen.
Income fell, self-care index rose
The contradiction is illustrated by the OTP survey. The financial institution’s usual annual Self-Sufficiency Index rose by 1 point this year to 35 compared to last year, a surprising result in a recession. But the rise in the index does not mean that everyone’s savings have increased. Social polarisation is clearly visible in the OTP data: more than a third of respondents have seen their situation worsen, and in 2020 the proportion of people with any of the 16 money market savings highlighted fell to an unprecedented 40%. According to the OTP survey, around 60 percent of people do not have savings in a financial institution and three quarters of them would not be able to save even a small amount each month. On the other hand, more and more of the bank’s customers are interested in long-term investments (securities funds, bonds).
The increase in OTP’s savings index is mainly due to the growth in financial awareness. In the last period only
9 percent of people have been able to increase the amount they save each month, but 42 percent of those surveyed believe they should save more.
Few people have had to break the buck
The good news is that few (8 per cent) have had to touch the money held in their savings product, but half of respondents have had to use the cash they have set aside.
Although many would like to put more money aside, falling incomes mean that they have few opportunities to do so (the only option left is to save, with 58 per cent having given up major spending since the beginning of March). Savers put aside an average of HUF 5,000 a month, with younger people (in their 40s) putting aside HUF 15,000. The majority of respondents would feel secure with savings equivalent to 1-6 months of their salary. Among OTP’s own customers, 18% have enough savings for at least 7 months.
A survey by NN Biztosító in the summer showed that the recession following the first wave of the epidemic had negatively affected one in two domestic households. 47 percent of respondents reported that their household’s financial situation had deteriorated. Despite this, almost half of people do not plan to reduce their savings, with one in two respondents saying they would continue to save the same amount as before.
NN Insurance’s survey also showed that few people (8 per cent) have increased their longer-term savings. 4 per cent had also had to cancel their insurance combined with savings. Overall, however, the number of people with life insurance did not fall, with 8 per cent taking out a new policy during the period. A further 11 per cent said they planned to take out life insurance in the near future, while 4 per cent said they would take out pension insurance.