Why don’t people invest their money?

What to invest in? How to preserve the value of money? These are issues that persistently bother Croatian citizens.

Interest rates of about 1% on savings in kuna, or about 0.5% on savings in euros, are the biggest reason why the citizens of Croatia today rarely decide to deposit money in the banks. These negligible interest rates simply do not stimulate clients of the banks to time deposit  their funds for a certain period. Savings interest has been falling for years, and as a result, despite the fact that the economy is recovering and employment rate is healthy, the amount of term deposits is decreasing. However, this does not mean that citizens are not motivated to save. According to Erste Bank’s 2017 survey, citizens spend an average of HRK  473 a month. According to the Croatian National Bank’s reports the total household cash has grown by more than HRK 8 billion in 2018. All the data show that the average Croatian family today has more money available than it did last year or the year before, but they also say that 94% of the total savings in the country are held by only 20% of citizens (Croatian Bank Association data).

People with higher solvency, i.e. those with more capital, are more motivated to invest in mutual funds than to keep term deposits in a bank. Given the low interest rates and the increase in the cost of living, the amount received after time deposit investment  , although in principle higher, may be worth less after the release of funds. Especially when taking into account the income tax and surtaxes which apply to term deposits.

The amount of money on bank accounts especially increases after the tourist season, but how much it will be upon completion of the (not so successful) current yer cannot be predicted. It is likely that most of that money will end up in a sight accounts,under mattresses, in socks or in a safe. The low level of the financial literacy of citizens, which was confirmed by the HNB (Croatian National Bank) and the HANFA research in 2016, is evident. An increase of citizens’ financial literacy is the key to the development of the society as a whole.