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Study Says Europeans Lose Purchasing Power Keeping Money In Banks
A study says that money kept in some European bank accounts is losing value because prices are rising faster than savings interest.
On average, €10,000 in a deposit lost about €294 of purchasing power over a year.
The study says investing could potentially have produced more growth, although investments can also carry risk.
Revolut compared deposits with the MSCI Europe ETF, which had a reported ten-year annualized return of 9.06%.
About €6.3 trillion was held in the deposits covered by the study.
Many people had never changed banks to seek better interest rates.
Some people did not understand inflation or where to find better options.
Others avoided investing because they thought it was risky or lacked knowledge.
European policymakers want more household savings invested in businesses and major projects.
Average one-year deposit rates were 2.76%, below 2.94% inflation, according to the study.
Savers lost an average of €294 in purchasing power for every €10,000 held in deposits.
Revolut estimated households could forgo €638 per €10,000 annually compared with the MSCI Europe ETF’s 9.06% ten-year return.
The study found €6.3 trillion in low-yield deposits across 20 European Union member states.
Lack of awareness, perceived investment risk and financial-service fragmentation were cited as barriers to investing.
- Who
- Revolut, surveyed European adults and European Union policymakers are involved in the report and its wider policy context.
- What
- A Revolut study found that deposit rates in many surveyed markets were below inflation, reducing savers’ purchasing power and potentially limiting investment.
- Where
- The research covered 20 European Union member states.
- When
- The study was published last week; the articles do not specify when the survey was conducted.
- Why
- The study examined why Europeans keep money in low-yield deposits and comes as the European Union seeks to channel more savings into capital markets.
Investment advocates
Cautious savers
Where household money should go
Investment advocates
Revolut and European Union policymakers argue that more household savings should be directed into investments and capital markets to support European businesses and major projects.
Cautious savers
Many savers continue to use bank deposits, with perceived investment risk and lack of knowledge identified as major reasons for not investing.
Response to low returns
Investment advocates
The study says consumers could improve potential returns by comparing banks or investing, and reports that the median first-time investment on Revolut in the European Union was €18.
Cautious savers
Two-thirds of respondents had never switched banks for a better rate; some preferred their existing bank, considered rate differences too small, or did not know where to look.
Scale of the opportunity
Investment advocates
Revolut estimated that deposits covered by its study represented €422 billion a year in potential growth capital, while the European Commission said its broader Savings and Investments Union could unlock up to €470 billion.
Cautious savers
The figures are not directly comparable: the European Commission’s €10 trillion estimate covers household savings in bank accounts across the entire European Union, while Revolut’s €6.3 trillion figure covers liquid deposits in 20 countries.
Key facts
- Survey size
- 20,007 adults
- Markets covered
- 20 European Union member states
- Average deposit rate
- 2.76% for one year
- Inflation rate
- 2.94%
- Deposits covered
- €6.3 trillion
- Purchasing-power loss
- €294 per €10,000 held in deposits
- Investment comparison
- €638 per €10,000 in potential annual growth compared with the MSCI Europe ETF benchmark
- Potential capital gap
- Revolut estimated €422 billion a year in potential growth capital does not reach European businesses
Sources
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