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Why don't Poles use effective forms of saving?

From the last available analysis on the portal analizy.pl, it can be deduced that the financial savings of Polish households exceeded 2 trillion PLN in Q1 2023. Cash and deposits together accounted for approximately 1491 billion PLN, or about 75%. Meanwhile, retail government bonds amounted to only about 95 billion PLN, which is less than 5%!!! Based on my personal experience, a portfolio consisting of 1/3 EDO and 2/3 COI over the past 2.5 years yielded a net return (after deducting the Belka tax) of 30%. The average annual CPI inflation was -5.1% in 2021 and -14.4% in 2022. If the average annual CPI reaches 12% in 2023, the cumulative inflation over three years will be approximately 34.66% (11.55% on average annually). At the current interest rate trend, my real portfolio's net return over 3 years could be around 36% (12.00% on average annually). This means that retail government bonds provide me with a real possibility to protect my savings from inflation at a similar level of risk (compared to bank deposits), which cannot be said about savings accounts and deposits. In a similar period, the best offers for deposits temporarily did not exceed 10% GROSS (on average, the interest rate hovered around 8.5% GROSS), and that usually applied to low amounts and short periods of 3-6 months, sometimes only with additional conditions such as new funds, new clients, and recently even a credit card included. It is worth noting, according to the aforementioned report, that significant funds are accumulated in expensive and/or ineffective investment funds (both domestic and foreign) and capital insurance funds, totaling approximately 255 billion PLN, while there are only around 300,000 active brokerage accounts in Poland, owned by only about 200,000 users. Why do Poles willingly pay distribution fees and/or redemption fees to banks (the largest distributors of investment funds, TFI), consciously or unconsciously reducing their own rate of return on investments? Few people realize that a 4% distribution fee means that a given fund must first earn around 4.2% for an investor to achieve a return equal to the nominal value of the invested capital (10000 PLN*0.96=9600 PLN, → 9600 PLN*1.0416=10000 PLN), not to mention any real profit.
From the last available analysis on the portal analizy.pl, it can be deduced that the financial savings of Polish households exceeded 2 trillion PLN in Q1 2023. Cash and deposits together accounted for approximately 1491 billion PLN, or about 75%. Meanwhile, retail government bonds amounted to only about 95 billion PLN, which is less than 5%!!! Based on my personal experience, a portfolio consisting of 1/3 EDO and 2/3 COI over the past 2.5 years yielded a net return (after deducting the Belka tax) of 30%. The average annual CPI inflation was -5.1% in 2021 and -14.4% in 2022. If the average annual CPI reaches 12% in 2023, the cumulative inflation over three years will be approximately 34.66% (11.55% on average annually). At the current interest rate trend, my real portfolio's net return over 3 years could be around 36% (12.00% on average annually). This means that retail government bonds provide me with a real possibility to protect my savings from inflation at a similar level of risk (compared to bank deposits), which cannot be said about savings accounts and deposits. In a similar period, the best offers for deposits temporarily did not exceed 10% GROSS (on average, the interest rate hovered around 8.5% GROSS), and that usually applied to low amounts and short periods of 3-6 months, sometimes only with additional conditions such as new funds, new clients, and recently even a credit card included. It is worth noting, according to the aforementioned report, that significant funds are accumulated in expensive and/or ineffective investment funds (both domestic and foreign) and capital insurance funds, totaling approximately 255 billion PLN, while there are only around 300,000 active brokerage accounts in Poland, owned by only about 200,000 users. Why do Poles willingly pay distribution fees and/or redemption fees to banks (the largest distributors of investment funds, TFI), consciously or unconsciously reducing their own rate of return on investments? Few people realize that a 4% distribution fee means that a given fund must first earn around 4.2% for an investor to achieve a return equal to the nominal value of the invested capital (10000 PLN*0.96=9600 PLN, → 9600 PLN*1.0416=10000 PLN), not to mention any real profit.
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12 answers


ksawon
Awarded

Lack of education and laziness.

Setting up a deposit is simple. Acquiring units of a fund is also quite simple - especially when the bank calls and prepares a relevant agreement.

Setting up an Individual Retirement Account (IRA) or even a bond account requires some effort. Personally, the necessity of visiting PKO BP deterred me from dealing with the topic of bonds - it was only when the official inflation rate reached 7% that it motivated me to overcome my aversion towards this bank.

Lack of education and laziness.

Setting up a deposit is simple. Acquiring units of a fund is also quite simple - especially when the bank calls and prepares a relevant agreement.

Setting up an Individual Retirement Account (IRA) or even a bond account requires some effort. Personally, the necessity of visiting PKO BP deterred me from dealing with the topic of bonds - it was only when the official inflation rate reached 7% that it motivated me to overcome my aversion towards this bank.

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IlonaCizewska1expert
Awarded
Several factors are important here:
  • Ignorance: lack of educational programs in the education system at an early stage when habits such as saving should be introduced
  • Lack of willingness to take actions aimed at self-education
  • Lack of patience, as an essential advantage
  • Inability to estimate potential gains and losses
  • Inability to assess risk
  • Willingness to use widely available and easy methods

These are just a few of them, but eliminating even a few and changing perspective would allow for a change in habits, including the habit of not saving or saving in an improper way.

Several factors are important here:
  • Ignorance: lack of educational programs in the education system at an early stage when habits such as saving should be introduced
  • Lack of willingness to take actions aimed at self-education
  • Lack of patience, as an essential advantage
  • Inability to estimate potential gains and losses
  • Inability to assess risk
  • Willingness to use widely available and easy methods

These are just a few of them, but eliminating even a few and changing perspective would allow for a change in habits, including the habit of not saving or saving in an improper way.

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MichauB
Awarded
Apart from lack of funds, for most people, investing is associated with loss. There is a widespread belief that only schemers invest. Lack of finance education.
Apart from lack of funds, for most people, investing is associated with loss. There is a widespread belief that only schemers invest. Lack of finance education.

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1 like

KubaStaszewski
Awarded
There are many factors that can influence why some Poles do not use effective forms of saving: 1. Lack of knowledge and awareness: Some Poles may simply be unaware of various effective forms of saving, such as treasury bonds or investment funds. Lack of proper knowledge about different financial instruments and their benefits can cause people to keep their savings in traditional forms, such as cash and bank deposits. 2. Conservatism and fear of risk: Investing in more advanced financial instruments, such as investment funds, can involve a certain level of risk. Some Poles may be conservative in their approach to savings and fear capital loss. As a result, they prefer safer but less effective forms of saving. 3. Low interest rates: The interest rates on bank deposits may be insufficient to attract investors. If Poles do not see attractive returns from saving in traditional forms, they may be less willing to invest in other financial instruments. 4. Lack of trust in financial institutions: Some Poles may lack trust in financial institutions and fear the loss of their savings due to irregularities or unreliability. This can result in a preference for traditional forms of saving, in which they consider their money to be safe. 5. Investment psychology: Human psychology can play a significant role in making saving decisions. Some Poles may succumb to emotions such as fear of losing money or a tendency to take risks based on short-term results. This can influence their choice of saving form.
There are many factors that can influence why some Poles do not use effective forms of saving: 1. Lack of knowledge and awareness: Some Poles may simply be unaware of various effective forms of saving, such as treasury bonds or investment funds. Lack of proper knowledge about different financial instruments and their benefits can cause people to keep their savings in traditional forms, such as cash and bank deposits. 2. Conservatism and fear of risk: Investing in more advanced financial instruments, such as investment funds, can involve a certain level of risk. Some Poles may be conservative in their approach to savings and fear capital loss. As a result, they prefer safer but less effective forms of saving. 3. Low interest rates: The interest rates on bank deposits may be insufficient to attract investors. If Poles do not see attractive returns from saving in traditional forms, they may be less willing to invest in other financial instruments. 4. Lack of trust in financial institutions: Some Poles may lack trust in financial institutions and fear the loss of their savings due to irregularities or unreliability. This can result in a preference for traditional forms of saving, in which they consider their money to be safe. 5. Investment psychology: Human psychology can play a significant role in making saving decisions. Some Poles may succumb to emotions such as fear of losing money or a tendency to take risks based on short-term results. This can influence their choice of saving form.

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1 like

cleosia
Awarded

I think there are several reasons for this, including: lack of investment knowledge, as well as lack of willingness to acquire this knowledge.
Another reason is the lack of funds for investments.

Poles believe that investing is difficult, involves high risk and requires large amounts of cash.

I think there are several reasons for this, including: lack of investment knowledge, as well as lack of willingness to acquire this knowledge.
Another reason is the lack of funds for investments.

Poles believe that investing is difficult, involves high risk and requires large amounts of cash.


1 like

MGil
Awarded
Why don't Poles use efficient forms of saving? Trivial answer - lack of financial education, primarily unfamiliarity with forms of saving/investment. A bank is the most common institution for holding assets. We have an account, so the "lady at the window" will propose some deposit and people buy it because they don't know anything else, and it doesn't require effort. They are not aware that there are a dozen (or dozens?) of other forms of saving investment. Slightly less trivial - lack of willingness to save (consumption of means, and if there are any savings, keeping them in cash for future expenses - like vacations). Lack of interest in saving. For people involved in investments, it seems natural to save and invest money - but we are a minority in society. I will draw attention to one more aspect - people who save through bank deposits may have heard of the capital markets - but it is associated with Get Back and Amber Gold for them. Unfortunately, such a stereotype, we return to the issue of education. ps. why does your bond portfolio include COI? It is tax-inefficient and has a lower interest rate than EDO. A portfolio of bonds that are 100% EDO is definitely more advantageous - pure mathematics indicates that :) And if the issue of interest payments convinces you in COI, remember that if you need money, you can withdraw EDO early.
Why don't Poles use efficient forms of saving? Trivial answer - lack of financial education, primarily unfamiliarity with forms of saving/investment. A bank is the most common institution for holding assets. We have an account, so the "lady at the window" will propose some deposit and people buy it because they don't know anything else, and it doesn't require effort. They are not aware that there are a dozen (or dozens?) of other forms of saving investment. Slightly less trivial - lack of willingness to save (consumption of means, and if there are any savings, keeping them in cash for future expenses - like vacations). Lack of interest in saving. For people involved in investments, it seems natural to save and invest money - but we are a minority in society. I will draw attention to one more aspect - people who save through bank deposits may have heard of the capital markets - but it is associated with Get Back and Amber Gold for them. Unfortunately, such a stereotype, we return to the issue of education. ps. why does your bond portfolio include COI? It is tax-inefficient and has a lower interest rate than EDO. A portfolio of bonds that are 100% EDO is definitely more advantageous - pure mathematics indicates that :) And if the issue of interest payments convinces you in COI, remember that if you need money, you can withdraw EDO early.

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1 like

Adny
Awarded
Why don't Poles use efficient forms of saving? In my opinion, the main reason for such a large scale is the strong marketing of investment funds in the media (the 90s and the 21st century). It is portrayed as safe and profitable compared to other saving methods - according to the motto "We will do it better than you, because it's too difficult" - banning knowledge of independent investment in the media and education while encouraging people to invest in overvalued projects, which for political reasons are also expected to fail. Few suspect that these investment funds, presented as "nice," "friendly," "kind," and "responsible" in the media, generate such poor profits or even losses!: - annual fees of approximately 4% (despite generating losses and management mistakes) - profits about 5 times smaller than the growth of the WIG when Poland joined the EU - lack of effective supervision over investments and financial transactions - manipulations - look at the collapse of "Credit Swiss" (trusted partner of PKO BP !!!) - if PKO Credit Swis - Akcji FIO fund had only invested in PKO BP shares, it would have significant profits instead of the losses generated over several years - of course, they blame the pandemic and war ... and encourage holding on because it will rebound from the slump :)) during inflation maybe?
Why don't Poles use efficient forms of saving? In my opinion, the main reason for such a large scale is the strong marketing of investment funds in the media (the 90s and the 21st century). It is portrayed as safe and profitable compared to other saving methods - according to the motto "We will do it better than you, because it's too difficult" - banning knowledge of independent investment in the media and education while encouraging people to invest in overvalued projects, which for political reasons are also expected to fail. Few suspect that these investment funds, presented as "nice," "friendly," "kind," and "responsible" in the media, generate such poor profits or even losses!: - annual fees of approximately 4% (despite generating losses and management mistakes) - profits about 5 times smaller than the growth of the WIG when Poland joined the EU - lack of effective supervision over investments and financial transactions - manipulations - look at the collapse of "Credit Swiss" (trusted partner of PKO BP !!!) - if PKO Credit Swis - Akcji FIO fund had only invested in PKO BP shares, it would have significant profits instead of the losses generated over several years - of course, they blame the pandemic and war ... and encourage holding on because it will rebound from the slump :)) during inflation maybe?

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1 like

OpenAI BOT
According to data from the last analysis of the financial savings of Polish households, it can be stated that Poles do not use effective forms of saving. The largest portion of savings consists of cash and bank deposits, which account for as much as 75% of the total value. Retail Treasury bonds, on the other hand, make up only 5%. Personally, based on my experiences, I compose an investment portfolio with ⅓ Renewable Energy and ⅔ Communications and Infrastructure, and over the past 2.5 years, I have achieved a net return rate of 30%, after deducting the Belka tax. Inflation in Poland was -5.1% in 2021 and -14.4% in 2022. If the average annual CPI inflation in 2023 is 12%, then the cumulative inflation over three years will be approximately 34.66%. At the current interest rate growth rate, the net return rate in my portfolio could be around 36% over three years. Thanks to retail Treasury bonds, I have a real possibility of protecting my savings from inflation with a similar level of risk compared to bank deposits. The same cannot be said for savings accounts and deposits. It is also worth noting that a large amount of funds accumulated in investment funds (Polish and foreign) and capital insurance funds, amounting to around 255 billion PLN, is inefficiently used. Meanwhile, the number of active brokerage accounts in Poland is around 300,000, of which only 200,000 users have such an account. Why do Poles willingly pay distribution fees to banks and for the redemption of TFI units, which results in a reduction of their own investment return rate? A distribution fee of 4% means that a given fund must earn at least 4.2% for the investor to receive the nominal value return on the invested capital. That does not yet take into account any real profit.
According to data from the last analysis of the financial savings of Polish households, it can be stated that Poles do not use effective forms of saving. The largest portion of savings consists of cash and bank deposits, which account for as much as 75% of the total value. Retail Treasury bonds, on the other hand, make up only 5%. Personally, based on my experiences, I compose an investment portfolio with ⅓ Renewable Energy and ⅔ Communications and Infrastructure, and over the past 2.5 years, I have achieved a net return rate of 30%, after deducting the Belka tax. Inflation in Poland was -5.1% in 2021 and -14.4% in 2022. If the average annual CPI inflation in 2023 is 12%, then the cumulative inflation over three years will be approximately 34.66%. At the current interest rate growth rate, the net return rate in my portfolio could be around 36% over three years. Thanks to retail Treasury bonds, I have a real possibility of protecting my savings from inflation with a similar level of risk compared to bank deposits. The same cannot be said for savings accounts and deposits. It is also worth noting that a large amount of funds accumulated in investment funds (Polish and foreign) and capital insurance funds, amounting to around 255 billion PLN, is inefficiently used. Meanwhile, the number of active brokerage accounts in Poland is around 300,000, of which only 200,000 users have such an account. Why do Poles willingly pay distribution fees to banks and for the redemption of TFI units, which results in a reduction of their own investment return rate? A distribution fee of 4% means that a given fund must earn at least 4.2% for the investor to receive the nominal value return on the invested capital. That does not yet take into account any real profit.

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Bicki39
Fewer and fewer people are saving, two reasons, at least I see it from my example. The first example, we don't save because we have nothing to put aside because we barely make ends meet from paycheck to paycheck. The second reason, more and more people are afraid to invest in a deposit or savings account because banks want a higher margin on the amount. If we leave 1000 PLN at 0.3 percent for three months, we have 3 PLN, i.e. 1003 PLN. Only after 100 months will we earn 300 PLN. So, by the time we become millionaires, we won't be here anymore.
Fewer and fewer people are saving, two reasons, at least I see it from my example. The first example, we don't save because we have nothing to put aside because we barely make ends meet from paycheck to paycheck. The second reason, more and more people are afraid to invest in a deposit or savings account because banks want a higher margin on the amount. If we leave 1000 PLN at 0.3 percent for three months, we have 3 PLN, i.e. 1003 PLN. Only after 100 months will we earn 300 PLN. So, by the time we become millionaires, we won't be here anymore.

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Malwina5550
In my opinion, people don't save because they don't have anything to save. I have a family of 2+2, both my husband and I work full time and our income is enough to cover our expenses from one paycheck to another.
In my opinion, people don't save because they don't have anything to save. I have a family of 2+2, both my husband and I work full time and our income is enough to cover our expenses from one paycheck to another.

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Maciek

@Duplikat_SamegoSiebie Just reminded me about the monthly purchase of ROD bonds :) Thank you.

@Duplikat_SamegoSiebie Just reminded me about the monthly purchase of ROD bonds :) Thank you.

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PiotrJuszczyk
I keep my money in the bank because it's convenient. I, on the other hand, am not representative in any way because I spend everything either on a house or on cryptocurrencies.
I keep my money in the bank because it's convenient. I, on the other hand, am not representative in any way because I spend everything either on a house or on cryptocurrencies.

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