Money for the future when there is not much to make ends meet... it is a problem of the present. The dilemma we face is stark: more than 60% of Spanish households spend more than they earn. As a result, the savings rate is still in the doldrums. According to the latest INE figures, the annual household savings rate stood at 6.5% at the end of June, the lowest figure since the first quarter of 2008.
What is the problem? Once again, World Savings Day has arrived, a date on which we could say mea culpa for not knowing how to save. How can we not die trying if saving ensures a better way of life? Perhaps it is a question of knowing how to prioritise, a lack of financial education in our homes? I asked an expert for some sage advice and he replied "I would tell people that saving is a question of priorities, that the future is coming before we know it". According to Javier Niederleytner, a veteran professor of Stock Exchange and Financial Markets at the IEB, we should save as much as we can, and as our income comes in, we should subtract the part that each of us deems necessary. The question is that we don't do it and it is paradoxical because the economic situation is improving, as is employment.
In savings, new factors also need to be taken into account, such as the influence of digital transformation on the financial ecosystem. Savings is valid in any form, and FinTech opens up new ways to achieve it. Learning from a masterclass by François Derboix, CEO of Indexa Capital, "in savings and investments, the main difference between FinTech companies and traditional financial services is that FinTech has put the customer back at the centre of the business". There is a lot of truth in this because roboadvisors or automated management platforms are offering new savings and investment alternatives to their customers. For example, companies such as Indexa and Finizens have already attracted thousands of customers since their respective launches in 2015 and 2017.
Currently, the market offers an infinite number of savings and investment models adapted to all types of budgets, risk profiles and expected returns. It is feasible to invest in your own home, taking advantage of the low interest rate environment, as well as through crowdfunding, where platforms such as Housers are democratising investment in the real estate market with investment options from 50 euros.
Another alternative savings channel in the FinTech environment is crowdlending or financing of companies, projects or individuals by numerous investors. According to data from the consultancy Finnovating, more than 20 companies are already operating in Spain and it is estimated that this year the total volume will exceed 100 million. With inflation at around 1.5%, investing through crowdlending is a good alternative to traditional banking, whose deposits and interest-bearing accounts barely cover the general increase in prices.
For the more daring, now that it is fashionable to talk about investing in cryptocurrencies, we must not forget that financial education allows us to control risks. Some say that the financial and banking crisis of recent years has highlighted the decline of the current monetary system and that physical money will soon disappear because virtual money is more transparent in its operations and is here to stay. Today there are more than 700 cryptocurrencies and investors in Bitcoin, for example, have witnessed a meteoric rise in its value, with a return of more than 1,000% in 2017 alone.
It is scary to gain so much, but even more scary to lose it all, to save you have to be consistent and prudent. "In the task of investing, it is the investors themselves, with their behavioural biases, who decide to be aware of the behavioural aspects of investing", a lesson I have learned from Ken Hsia, manager of Investec AM. This is economic psychology, investor behaviour and markets. We are not willing to save for our needs, but we are willing to spend more for what we like and are excited about. Let's stop looking at the short term, with a broader spectrum for managing our long term savings.