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Piggy Bank in Crisis, or How Russians Save

One in two Russian families have no savings and one in three have no outstanding loans.

More than half (51%) of Russians did not make savings before the current economic crisis and are not making any today. As of the end of 2016, 70% of Russians did not have any outstanding loans or debts.

Researchers of the HSE Institute for Social Policy (ISP) examined Russians' borrowing and saving behaviour in the ‘Monitoring of Russian Population in 2016: Revenues, Expenditures and Social Well-being’.*

Save or Spend?

According to a nationwide survey conducted by HSE in September 2016, just 11% of Russians are saving more today than they did two years ago. More than 25% of respondents said that since 2014 (when incomes started to decline due to the crisis), their families have been saving less or stopped saving altogether.

Younger people aged 25 to 35 are less likely than other age groups to have cash reserves, and 46 to 55-year-olds tend to spend more than others. The researchers are concerned about the latter finding, as “high levels of spending shortly before retirement can affect one's ability to maintain acceptable living standards once retired."

Rich and poor Russians have tended to respond differently to the crisis. While making savings was not characteristic of low-income people either in 2014 or in 2016, many affluent Russians have been saving even more than before. However, 30% of people with high and middle incomes have recently been saving less or stopped saving altogether, choosing instead to maintain the same level of consumption they enjoyed before the crisis.

Financial Safety Cushions: Can They Really Help?

Only about 9% of Russian households have saved enough to help them survive for at least a year without other sources of income; for 23% their financial safety cushion will keep them afloat for a month at most, should they continue to spend at the same rate; 30% of respondents hope to survive on their nest egg for a couple of weeks, and 16% admit that their savings won’t last them even for a day.

Three-quarters of the respondents made no effort to protect their savings.

Those who took steps to safeguard their money used a variety of methods, the most popular of them being deposit accounts, purchase of foreign currency and real estate; investments in expensive items one might resell later or in securities were far less common.

According to the respondents, using rouble savings to purchase foreign currency was the most effective strategy; those who purchased real estate or opened bank deposits were also happy with their decisions.

Debt Burden

The survey revealed that 70% of Russians do not have outstanding loans or debts. Most of the remaining 30% (one in every five respondents) are repaying rouble loans taken out from banks or retail stores; 4% have outstanding mortgage loans in roubles and 0.2% in foreign currency; 3.5% have outstanding debts on utility payments, and 5.5% are indebted to private individuals.

By European standards, a family is considered over-indebted if they spend at least 50% of household income on monthly repayments.

In Russia, one in every five indebted households faces this situation, and another 25% of borrowers spend one-third to one-half of their budget on debt repayment.

Almost 30% of Russians delayed repayment or defaulted on their loans in 2014-2016. They dealt with the problem in different ways, from renegotiating debt to selling property to repay, but the most popular solutions were to borrow (55%) or seek financial assistance (16%) from family or friends.

About 13% of those with debt repayment problems were able to find a better-paying job or earn money on the side, and approximately the same number of insolvent debtors (13.7%) chose to do nothing at all.

*Periodic monitoring of poverty, income, health and consumer preferences of Russian households, based on Rosstat and Russian Public Opinion Research Centre (VTsIOM) data and on findings from a survey of social well-being and poverty, commissioned by the HSE and conducted by VTsIOM on a monthly basis. The latter survey uses a representative sample of 1,600 respondents in 130 communities of 46 Russian regions.

The section on lending and saving behaviour is based on data from a nationwide survey conducted by the HSE in September 2016 on a representative sample of 2,000 respondents to inform an in-depth analysis of economic behaviour during the economic downturn.

January 30, 2017