OREANDA-NEWS. October 27, 2010. The population of Latvia prefers to rely on the state allowances or the hope of improvement of the quality of life in the future instead of relying on their own ability to create a "safety bag" for rainy days or secure well-provided old age, reported the press-centre of DnB NORD Banka.

Such conclusion was derived from the study conducted by DnB NORD Banka and ERGO insurance company that also detected that right now savings are made by less than one fourth of all population, and moreover, most typically their nest-eggs are tucked away.
 
Vice-president of DnB NORD Banka Ivars Kapitovics explains: "Any economy displays cyclic recurrence of both ascending and descending periods, and the activities and attitudes of the general population towards making of savings over the prosperity period contribute to overcoming the nadirs of downturn.

Thus, it is important after gradual stabilization and growth of the household income to avoid concurrent growth of expenses. In order to create a "security bag" for more complicated periods at the household or the state level increase in income should bring with it a long-term savings plan."  

After having analyzed the current savings experience was revealed rather disturbing picture: mere 5.8% of all respondents accumulate funds in the bank deposits, just 4.9% have subscribed to the third pension pillar, 3.2% make contributions to the children's tuition funds, and 2.7% invest in cumulative life savings, whereas 69.2% of all people make to savings at all. In turn, 8.2% of the respondents prefer other types of savings.

Right now the group of population that is most actively involved in making of savings are inhabitants of Riga or Kurzeme region with medium or high income, between 25 and 54 years of age, as well as people with children, however just 6% of respondents representing this group make deposits in the children's tuition funds.

When asked to mention the amount that could be earmarked for savings 48% of respondents answered that they are not ready to earmark any amount for this purpose. Most typically people are ready to allocate for monthly deposit 10 lats. Up to 20 lats per month for the savings purpose were ready to deposit 25% of respondents.
 
Deniss Sazonovs, ERGO Management Board member in the Baltics: "According to the global experience, the mean age to make savings within the life insurance is between 35-40 years, and the amount on average tallies up to at least 10% of all income. In the Baltic States the average age of depositors is similar, however the amount earmarked for savings - considerably lower, in Latvia on average mere 5% of the mean remuneration level in the country. According to the study results it is obvious that there is a certain "savings culture" in Latvia, though its development proceeds at rather slow pace. The study shows that we are not used to save for the future; are ignorant; rely on the government and some better times. However, the recession has been a good lesson, since people have realized that savings are important, and changes in opinions on necessity to make savings for old age or children's education are obvious: it is evidenced also by growth of the life insurance market in Latvia this year."

The study reveals that people belatedly start to consider their options to secure well-provided old age. Securing of old age was viewed as preferential goal for making of savings by 26% of respondents, however, the majority of this group comprise people between 45 and 54 years of age.

The study found out that approximately one fifth (21%) of the population is still concerned about unemployment risk, and this is why they consider cumulative life insurance an efficient option to preclude a household crisis. The number of people who are aware that cumulative life insurance is an efficient solution to protect themselves against unexpected contingency situations or loss of operational capacity, is slightly greater, i.e. 23%.

Interestingly, that younger people (between 18 and 24 years) are very circumspect with regard to savings, i.e. prefer a convenient and profitable long-term saving that mean investment without any excessive risk. Young people point out that their motivation behind making of savings derives from the need to obtain education and the existing situation in the state educational system.

Respondents admit that most likely (in 17% of cases) they would make savings if prompted by a positive experience of their friends or acquaintances. Similar number or 16% of respondents have indicated that of assistance would be detailed information on savings and the expected benefits therefrom.  
 
DnB NORD Banka has entered into the cooperation agreement with ERGO insurance company

The situation in the field of savings in Latvia is disturbing, as majority of population is not into savings, whereas one half of all respondents at least in the nearest future are not going to spend a dime for this purpose.

Being aware of importance of the emerging savings culture for every individual household in particular and the state economy in general DnB NORD Banka and ERGO Latvija Dziviba AAS have entered into a cooperation agreement on provision of life insurance services to the Bank customers.

The customers of DnB NORD Banka further on will be offered an opportunity to execute the borrower's life insurance policy, thus securing financial stability of their family in contingency situations. In addition to the borrowers' life insurance the customers will be offered an opportunity to make savings through various funds.