“My advice? Invest a portion of the 500 billion in high-risk companies”

The Dutch are saving their money en masse. New figures show that bank deposits now exceed €600 billion. No less than 500 billion of this is in savings accounts. Wouldn’t it be better to spend this money, which is losing value in times of inflation and low interest rates, on investments, for example? We asked chief economist Thijs Knaap of APG for our “Figure of the Week” section.

The Dutch are keen savers. While total savings amounted to €400 billion in 2021, this figure has now risen to €500 billion. According to Knaap, this record is mainly attributable to increased saving. “Interest rates are low, hovering around 1% over the past four years. The current increase cannot be linked to this. It really is due to the fact that Dutch people have saved more.”

According to APG’s chief economist, this amounts to an average of €60,000 in savings per family. “But we also know that 61 percent of total assets are held by only 10 percent of households. This means that few households have a lot of assets and vice versa; the vast majority do not have €60,000 in reserve.”

So the first group is very rich and the last group is poor?
“The average Dutch person’s wealth is not only in savings. A report was presented in 2022 that mapped out the average wealth of Dutch people. It turns out that the biggest item is pensions, accounting for 42 percent of total wealth. And 31 percent is home ownership (for people who own their own home with no mortgage). Then there is significant wealth, which mainly applies to entrepreneurs. This accounts for 10 percent. Savings and investments account for ‘only’ 9 percent of total wealth.

Conclusion: that 500 billion is only a small part of the total wealth of Dutch people. So, having little savings does not necessarily mean you are poor.”

Why do people deposit that money in savings accounts instead of putting it into high-yield investments?
“Saving is risk-free, at least up to €100,000. If you buy shares, you can also lose money. Theory suggests that if you are young and at the beginning of your career, you can still earn a substantial amount of money and therefore take more risks. Conversely, theory also suggests that if you are older and nearing the end of your career, you should be cautious about taking big risks. It also suggests that individuals with substantial wealth can logically take more risks than those with limited financial means. But what does practice tell us? In the run-up to the new system, APG conducted extensive research into what people want to do with their money. This risk preference survey among participants mapped out how they view the risks of investing in their pension. It turned out that younger people are willing to take more risks than older people. It also turned out that people with a lot of money are willing to take more risks than people with less money. Therefore, the theory aligns with practice.

However, if those young people or wealthier older individuals want to invest their savings, they will find that it is quite complicated. You have to open an account, research what you are investing in, transfer money, and pay transaction costs; these are all barriers. Saving, on the other hand, is very easy. You transfer money and you’re done. I often compare it to opening a savings account abroad. You get a lot more interest, but it is also complicated. Some banks require you to have a checking account with them if you want a savings account or a mortgage. People simply prefer the familiar environment of their own bank. As a result, only 3 percent of total savings, or $15 billion, is held abroad, despite the higher interest rates.”

Isn’t it also true that Dutch people simply don’t like taking risks?
“That’s right. Risk aversion, or the avoidance of risk, is high in the Netherlands. This is because Dutch people prefer a certain outcome to an uncertain one, even if the uncertain outcome has a higher potential return. On the other hand, most of our assets, namely our pension funds, are invested. A house is also a risky asset. And I’m not even talking about entrepreneurs who have a lot of their own capital tied up in their businesses. So, when you look at the big picture, it’s not that bad. We are willing to take risks, and it’s not such a bad thing that we like to save our money.”

But still, the economy would benefit if that money were spent. How do you see it?
“Approximately a quarter of these savings are spent by banks on providing business loans to, for example, the butcher around the corner, the clothing store, or the coffee shop. That money is not sitting idle; it is used to stimulate growth. However, it is only a quarter and not always a significant group of companies for the economy. It’s different for companies that take significant risks, innovate extensively, and have radical ideas. However, they struggle to raise funds. Currently, they primarily obtain funding through their own capital, family loans, or venture capital. My advice? Invest a small portion of the total savings of 500 billion in companies like these in the Netherlands. But how? That’s up to the companies. They need to reach out to the right people. This is very important. As I said, 61 percent of savings are held by 10 percent of households. Young people and the wealthy are more willing to take risks. You also need to look at people who are already taking risks with their total assets. This brings me to self-employed people without pension plans. They are the most promising target group.”