Six out of every ten Ecuadorians do not save themselves 11% of people have savings as the main source of an emergency fund.

The CRISFE Foundation analyzed the problem of the lack of savings among the Ecuadorian population.

According to The Global Findex 2021 39% of Ecuador’s population saved in the last year. These data coincide with figures from a study by the Network of Development Finance Institutions (DFI) which states that six out of ten Ecuadorians do not save and 53% cover daily expenses with loans.

“Although Income level can have a big impact, it is not always the main cause of lack of savings, since this situation is closely related to behavior and financial discipline. In many cases, an increase in a person’s income does not automatically mean a greater ability to save,” explains Henry Ortiz, a financial education expert at the CRISFE Foundation, who has analyzed the causes that make it difficult for people to save.

What are the other reasons that affect the ability to save?

Ortiz says personal behavior often has a bigger impact than income level. “We have observed cases where, despite the low daily income of informal traders and street vendors, they have developed a habit of saving to face days of low sales,” he adds.

This analysis is aligned with the hypothesis of the CAF study which emphasizes that “People with low incomes achieve better results in financial well-being than people with middle incomeswhich suggests the impact of factors additional to income on financial results.”

A financial education expert points out that one of the most worrisome consequences of not saving is people’s vulnerability to unexpected expenses or emergencies. “In the best cases people turn to formal sources of funding, but in other cases they turn to friends or family, and in many cases they resort to ‘chulka’ to cope with these unexpected events.

According to a study conducted by Equifax, those people who resort to informal or “chulco” credit can pay up to 1.238% annual interest, which is equivalent to approximately 103% per month.

This is reflected in The Global Findex 2021 statistics, which show that only 11% of people have savings as their main source of emergency funds (for less than 30 days), while 42% turn to friends and family. According to CAF research, only 40% of Ecuadorians believe they could face an unexpected expense equal to their personal monthly income without resorting to credit or the help of friends and family.

“Another consequence of not saving is that, both on a personal and a family level, it is difficult to achieve financial goals, from going for a walk, paying debts and even buying a house. In short, the lack of savings negatively affects our financial well-being,” adds Ortiz.

In this context, Ecuador has a score of 57 out of 100 in financial well-being, according to CAF 2020, while the average of countries in the region is 59 points, which is considered low.

Ortiz also emphasizes that there are strategies to improve savings in the country. “It’s not just about providing financial education, it’s about providing genuine support that helps people develop the habit of saving. If this behavior is not instilled, even if someone increases their income, they are unlikely to save.”

At the family level, small actions can also be implemented that ultimately contribute to savings. “Saving does not necessarily mean accumulating money, but also reducing expenses. It may be difficult to ask someone who earns less than the basic wage to save $10 a month, but we can start by analyzing how to save in a family environment, such as not wasting food, water or electricity,” adds Ortiz.