Bank deposits are the primary form of savings for Romanians, research says

Raiffeisen Bank Romania and the Faculty of Finance, Insurance, Banking and Stock Exchanges of the Bucharest Academy of Economic Studies announce the results of the research project on the saving and investment behavior among the Romanian population, with a focus on the current situation at the national level, compared to other EU countries.

In terms of saving, Romanians prefer bank deposits, but the level of participation in the capital market is low, Romania having the lowest level of financial literacy in the EU. The number of Romanians who have decided to join the Third Pension Pillar has registered a continuous increase in recent years, with the total net assets managed by the 10 voluntary pension funds existing in the market exceeding 950 million euros, shows a large research project carried out, for the first time, by Raiffeisen Bank and the Bucharest Academy of Economic Studies.

“The detailed analysis of saving and investment behavior provides us with valuable insights, allowing us to better understand the factors that influence Romanians’ financial decisions in today’s dynamic economic context. The conclusions of this research highlight the need to accelerate financial planning and we believe that by leveraging this data, we can better support clients in their efforts to secure a more stable long-term financial future. With a team of nearly 5,000 professionals, we have revolutionized the way the banking environment supports financial planning. Over 1 million Romanians have interacted with the Smart Finance tablet thanks to our team, thus taking steps towards financial planning. The results are encouraging and it is not just about overcoming quantitative milestones, it is about trust and the mission of coming up with an expertise that is truly relevant and valuable for each of our clients,” said Zdenek Romanek, President & CEO, Raiffeisen Bank Romania.

“Researching economic phenomena and processes has been and will remain one of the main objectives of the Bucharest Academy of Economic Studies. Within it, our specialists (teaching staff, researchers, doctoral students) carry out important analyses, which scientifically substantiate and propose solutions regarding essential aspects of the dynamics of economic life. The study ‘Savings and investment behavior among the population of Romania in a European context’ is an example of useful and absolutely necessary research for the financial-banking sector. Through the specific means of research in the financial field, the project team established at the level of the Faculty of Finance, Insurance, Banking and Stock Exchanges has obtained and offers valuable information regarding savings and investment behavior, both for financial entities providing financial products, and for their current or potential clients. The results obtained by our colleagues are also relevant for authorities or professional bodies in the financial and banking field, in order to implement public policies regarding increasing the degree of financial preparedness and increasing the degree of awareness of the need to invest, especially in products with a protective role, such as pension funds,” added Prof. univ. dr. Nicolae Istudor, Rector, Academy of Economic Studies of Bucharest.

How Romanians Save

Bank deposits are the primary form of savings for Romanians; however, their level is the lowest compared to other countries in the region, such as Bulgaria, the Czech Republic, Poland, or Croatia.

Romanians aged over 65 prefer term deposits more than younger individuals (<60 years). On the other hand, only about 6% of people under 25 opt for term deposits. According to analyzed data, 20% of those with term deposits have higher education.

Key factors favoring the ownership of a bank deposit include a high level of education, higher income, and job stability. People living in urban areas with access to financial services are also more likely to have a term deposit.

740,000 Romanians Have Chosen Pillar III Voluntary Pensions

At the end of 2023, the total net assets managed by the 10 voluntary pension funds reached €953 million, marking a new historical peak and reflecting the population’s increased interest in securing additional retirement income.

The number of Romanians who have joined Pillar III pensions has shown continuous growth. By mid-2024, 740,000 Romanians were enrolled in Pillar III voluntary private pensions. Among them, the proportion of those over 55 years old has significantly increased, from 6% in 2011 to 22% in 2024. However, over the past 13 years, participation among young people under 35 has declined, while it has remained relatively stable for those aged 30-44 and moderately increased for the middle-aged group, 45-54.

Income and job stability are the most critical factors influencing the decision to join a voluntary pension scheme. The COVID-19 pandemic was a turning point for individuals in stable professions (medicine, law, management) to start contributing to voluntary pensions.

Compared to Romania, the profile of a participant in a voluntary pension scheme is much better defined in EU countries in the region (Bulgaria, the Czech Republic, Poland, or Croatia), where education and financial inclusion are highly relevant.

Profile of Romanian Investors on the Capital Market

Romania has the lowest financial literacy level in the EU, significantly impacting the reduced participation in the capital market.

Additionally, in Romania, investors show a relatively higher risk aversion compared to more developed countries like the U.S., similar to other Central and Eastern European (CEE) countries such as the Czech Republic, Poland, and Croatia.

Results obtained using standard econometric techniques and machine learning models show that the individual interested in investing in the capital market is typically male, has a high level of financial education, higher education, and a high income.

Investing in risky assets such as stocks attracts a different type of investor compared to those oriented toward safer savings options like bank deposits or pension funds, due to the higher risks involved and the distinct motivations driving these financial decisions.

Younger individuals are generally more willing to take risks in hopes of future gains, while older people prefer investments with more predictable returns.

Income plays a significant role in determining risk tolerance. Individuals with higher incomes are more inclined to invest in risky financial products as they have the financial capacity to withstand potential losses.

The decision to invest in various risky products on the capital market is more pronounced among individuals with higher levels of financial knowledge. Therefore, financial literacy is a determining factor in shaping investment behavior, especially in an emerging capital market like Romania’s.