In 2024, it is certain that households will not suddenly be left without savings. Between January and June, the level of accumulated money increased to almost 14% of their disposable income, according to the latest data from the National Institute of Statistics (INE). This is the highest rate recorded in the first half of a year since 2021, when savings reached historic highs due to the slowdown in consumption caused by the pandemic. Despite the apparent positive balance, it is worrisome that savings are being supported by pensioners—both current and future—at the expense of spending. During this period, family spending should have increased almost three points more to match the growth in incomes. Household gross disposable income increased by almost 9% year-on-year to 253.644 billion euros by June, but spending only grew by 6.7%.
There are several reasons contributing to this phenomenon. Miguel Cardoso, chief economist for Spain at BBVA Research, explains that while employee income is growing, this is more due to an increase in employment than to a real increase in wages. For many families where the number of working individuals has not increased, income has grown below inflation, limiting their ability to consume more. The growth in employment is benefiting groups with a lower propensity to spend, such as high-income earners, migrants, and retirees, which is boosting savings. The level of spending changes over the years, with the highest increase in savings historically occurring in middle age when debts incurred in youth, such as buying a house, are paid off. It is typical for accumulated wealth to be spent once individuals reach retirement age.
This economic principle may be changing due to two reasons: increased life expectancy and uncertainty about the sustainability of pensions. The Bank of Spain suggests that pensioners may consume less than previous generations, and the decline in birth rates may result in fewer inheritances, prompting increased demand for financial instruments generating lifelong income during retirement. Spain’s ageing population, with 20% currently aged over 65, expected to exceed 30% by 2050, poses challenges for the country’s economy. With 6.3 million retirees receiving pensions, compared to one million more a decade ago, there is increasing strain on the state and declining social security contributions financing these benefits, potentially impacting current household savings.
A significant portion of the increase in disposable income is going to individuals with a low propensity to spend, meaning despite higher incomes, they are spending less. Pensioners constitute a major part of this group, benefiting from significant pension increases in recent years tied to inflation, enabling them to cope with rising prices. The Bank of Spain recognizes that the spending of Spain’s older population relies heavily on public pension generosity, leading to increased savings. Factors such as reduced daily commuting and increased focus on health and uncertainty about future care influence older individuals to save more. Additionally, concerns about leaving money to children or grandchildren may also contribute to decreased consumption among retirees.
Another factor contributing to the increase in savings in recent years is the rise in incomes among the wealthy. CaixaBank reported that property income has increased significantly due to dividends and investments, benefiting families with higher purchasing power. This segment, along with pensioners, tends to save more and consume less. The evolution of inflation and the recovery in employment and wages are also influencing higher savings levels. Analysts note that the moderation of inflation since last year has been a welcome surprise for families who had anticipated higher prices and adjusted their consumption accordingly. Overall, the combination of these factors is driving the current trend towards increased savings among Spanish households.
