Household Saving Behavior in the Euro Area

We study saving motives and household saving behavior in fifteen euro-area countries using the first wave of the Household Finance and Consumption Survey that covers the years 2008-11. We find that precautionary saving is the most commonly reported motive in all countries, followed by saving for old-age provision. Preferences for other motives are then rather heterogeneous across countries. Saving for home purchase and precautionary saving are monotonically decreasingly important with age. Variables related to the structure of the tax system and to the generosity of the social security and welfare systems are important determinants of household saving. As for actual saving behavior, we find that most households in the euro area perceived their expenses over the last twelve months to be about the same as expenses in a "normal" year in the past and about the same as income over the last twelve months. The analysis by country reveals some degree of heterogeneity for this measure of self-assessed household saving: the countries that were hit most severely by the financial crisis display higher financial stress.