Shrinking savings: Data reveals how much less you could be saving this year

New Zealand households could be saving nearly $4000 less this year compared with 2020 as rising costs eat into disposable income, according to new findings.

Global comparison site Finder’s Savings Report, which analysed data from the OECD, found while annual savings on average were expected to fall across the OECD, New Zealand was significantly worse off.

New Zealand households saved 5.54 per cent of their disposable income in 2020 - or $3,845 - but this is predicted to drop to -0.2 per cent in 2022.

The negative savings rate means the average household is spending an extra $139 they don’t have.

In real terms, annual savings are predicted to drop by an estimated $3,984 by year-end.

The figures were based on the average household disposable income for New Zealand, which is $69,405, according to the OECD.

It will be the first negative savings year since 2015.

New Zealand is one of only two countries that could see their savings dip into negative territory in 2022, ranking 28th out of 29 nations included in the data - ahead of Poland (-1 per cent).

Seventeen nations were also classed under the “Euro area”.

The global average annual savings for OECD nations this year is predicted to be roughly 7 per cent of their disposable income.

However, savings are predicted to drop by an average of $3,374 across all OECD nations.

Last year New Zealand households had a savings rate of 0.5 per cent, or $347, still significantly down on 2020, according to Finder’s Savings Report.

Pre-pandemic (2019) this figure was 3.1 per cent, or $2,159.

Angus Kidman, Finder’s editor-at-large in New Zealand, said cost-of-living pressures and a return to life post-pandemic are likely to blame for the drop in savings.

The Reserve Bank has been aggressively hiking the Official Cash Rate (OCR) since October 2021 in a bid to rein in rampant inflation, which was sitting at 7.2 per cent for the year to September.

The OCR is currently at 4.25 per cent, and could peak at 5.5 per cent in mid-2023, according to expectations, putting more financial pressure on mortgage holders.

“Inflation is at an all-time high and is putting pressure on family budgets. The cost of housing and food have risen sharply over the past few years and wages haven’t kept pace, so it’s not surprising to see national savings shrink,” Kidman said.

“It’s disturbing nonetheless.

“It’s worth noting the high savings numbers in 2020 were at the peak of the pandemic. So much of this could be due to different spending patterns during the lockdowns, Government stimulus, and money saved by not travelling.”

Switzerland had the highest forecast household savings rate for 2022 at 20.1 per cent, or $14,191.

This was followed by Luxembourg (17.3 per cent) and Sweden (13.8 per cent).

Australia placed ninth, with a forecast savings rate of 8.6 per cent.

“Even pre-pandemic, New Zealand has always historically had a low savings rate relative to other OECD countries,” Kidman noted.

“The tough Covid response might be part of the story, but that was also true of Australia where the same pattern isn’t as evident.”

Kidman said growing debt seems to be an ongoing pattern in New Zealand.

“Previous Finder research found nearly half (47 per cent) of Kiwi credit card holders feel stressed about the amount of credit card debt they have accrued in the past 12 months.”

And figures from credit bureau Centrix last week showed more Kiwis are falling behind in their personal and home loans, while demand for credit was rising.

The number of home loans with missed repayments rose for the third month in a row, with 15,200 mortgage accounts currently past their due date. Consumer arrears rose 5 per cent.

Demand for personal loans was up 18.1 per cent in October year-on-year.

Meanwhile, consumer credit defaults were up 21 per cent on October 2021.

Kidman warned a lack of savings could leave Kiwi families at real financial risk if an unexpected event occurred.

Last month a Payments NZ survey of 1000 New Zealanders found one in four (25 per cent) couldn’t service an unexpected expense.

More than a third (37 per cent) said they were unsatisfied with the amount of savings they have.

“A lack of emergency funds could leave you unprepared with very little to fall back on. A little bit of effort now to create an emergency fund will save you a lot of stress later on,” Kidman said.

“The key step is to set a budget. This is vital because it allows you to see exactly where your money is going. From there, you can see where you’re able to cut out non-essentials to ensure you have enough money to put some aside each month.”

Meanwhile, new findings from Consumer NZ’s sentiment tracker showed more than half of Kiwis were saving less than 5 per cent of their income.

“With annual inflation hitting 7.2 per cent and wages failing to keep up, many households are struggling to tuck money away,” Consumer NZ said this morning.

“One in four New Zealanders is unable to put aside anything.”

Consumer NZ’s Gemma Rasmussen said many financial experts recommended people saved 15 per cent of income each year.

“Our research has found that there’s a rising number of people that have been pushed into hardship in the last year. One in four New Zealanders stated their standard of living had declined.”