Who are the (dis)savers? A look at household saving patters and wealth composition in Malta

In this note we build on recent findings on household saving patterns in Malta by utilising two large-scale surveys: the Household Budgetary Survey (HBS) and the Household Finance and Consumption Survey (HFCS). We show that saving rates correlate strongly with income and age, and that a significant share of households which dissave tend to report positive saving in a self-assessment question of one of the surveys. Under-reporting of income, financial illiteracy and cognitive errors and biases may be behind this finding. A significant share of dissavers tend to be old-age and low-income households, which may have difficulty meeting unanticipated expenses unless they can draw from a buffer of wealth. Households are heterogeneous in their wealth holdings, and while several dissavers can fall back on a buffer of wealth, a lot of this wealth is tied up in illiquid assets. Furthermore, we show that some of the old dissavers do not have a sufficiently large pot of liquid savings to finance their current dissaving patterns over the rest of their life. These findings are of policy relevance especially when assessing the ability of retired households to meet an unanticipated expense. Home equity release schemes can free up wealth held in property, while emphasis on pension plans for younger households can prevent this situation for future retirees.