Various reports on the financial wealth of Italians have shown that there are over one trillion euros stuck in current accounts. In percentage terms they are less than in the past, but it is still a huge amount that could be made available with various instruments, depending on the risk one is willing to take.
The instruments exist, from the most uncertain ones such as shares to simple deposit accounts. However, financial education is often lacking to understand what they are used for and when they should be used.
How Italians could invest the 1,163 billion they have in the bank
The Efama report shows that Italy is no longer among the countries where people save the most by leaving money in the bank. However, this does not mean that there is little money left in Italian accounts. 1,163 billion is 37% of the total financial wealth of families. In the US this percentage is 12%.
The ways of investing are different, but each instrument adapts to different needs and situations. The current account remains the “first pillar” of personal finance, around which a strategy should be built depending on how much you want to risk.
Stocks are increasingly attractive
In addition to current accounts, a recent Fabi report showed that shares are the main means of investment for Italians. A rather strange circumstance, given that one should only invest in these instruments when one’s financial situation is extremely stable and mainly for long-term projects.
Shares are the riskiest instrument on the market, excluding speculation which, however, is not part of savings management. The potential earnings are greater, but the guarantees are relatively few. Even synthetic instruments, such as equity ETFs that replicate entire national or even global indices, do not protect against crises and sudden worsening of the financial markets.
The Italian exception of government bonds
Another oddity in the way Italians save is government bonds. These instruments are medium risk, but their danger changes depending on which country you choose. Often, savers in our country opt for Italian debt, a choice that significantly lowers the risk of not seeing the money invested repaid.
Bots and BTPs can be used in various ways, such as:
- protect savings from inflation;
- obtain revenues from sums set aside for future expenditure.
Pension funds and new needs
A choice that Italians don’t make very often is to put their money in pension funds. This happens for several reasons:
- historically the state pension was enough to live with a good lifestyle;
- wealth is concentrated in the older segments of the population, who have no interest in using this tool.
Supplementary pension provision, however, will become increasingly important. The pension system will no longer ensure an income sufficient to maintain lifestyles similar to those of one’s working career. Supplementing your social security allowance by accumulating a sum over time will be increasingly crucial.
The accounts are not risk-free either
Among the reasons why Italians tend to keep a lot of money in their current accounts is the idea that money in the bank is protected from any type of risk. While accounts are certainly the least dangerous instrument, it is not correct to say that the money inside them is completely safe.
Even the checking account has its dangers
A recent Bank of Italy report showed that, in recent years, inflation has eroded 11% of the value of money in Italians’ current accounts. This is the main problem with the tendency to keep so much money in these instruments.
The current account is used for current expenses. It is liquidity immediately available to cover everyday expenses. Already the money set aside “just in case”, the emergency fund, could be deposited in other low-risk instruments.
When is a deposit account convenient?
The classic example is that of deposit accounts. In the years before the Covid-19 pandemic and the war in Ukraine, these instruments had lost attractiveness due to the very low interest rates imposed by the ECB.
For the emergency fund it would be better to choose a non-refundable one, but savings accounts can also be used for foreseeable expenses. In this case, if you are sure that you will not need the money suddenly, you can choose fixed deposit accounts, which have a higher yield.
