• On World Consumer Rights Day, we talk about sustainable consumption.
• Dream holidays, home renovation, or a new car – consumers can have different goals. Loan or savings – which one will you use?
• The President of UOKiK has introduced a new tool for consumers: a calculator that helps them plan savings for different goals.

Responsible consumption is one of the pillars of sustainable development. Unfortunately, a distinctive feature of our time is excessive ownership, purchasing, and accumulation. Meanwhile, the key to success on the road to sustainability is the habit of saving, the ability to manage finances and to set aside not only for a rainy day, but also for all plannable expenses. On World Consumer Rights Day, which falls on 15 March, we remind consumers of the need to build financial buffers.

Being thrifty and save money

Poles have a relatively high level of financial and economic awareness. In international surveys conducted by the International Network on Financial Education (INFE) and the OECD, we perform above the average for Western European citizens when it comes to understanding issues such as the time value of money, the effects of inflation, and investment risk. Studies on the level of economic awareness carried out by the National Bank of Poland lead to similar conclusions. So why, despite understanding the benefits of long-term saving, do we put this knowledge into habit only occasionally?

The reluctance to save is due not only to the difficulty of growing a surplus of money or the rising cost of living, but also to the lack of attractive long-term deposits and savings accounts to support the saving habit. Where can we currently find appealing options for systematic saving? And why are we discouraged from saving through certain mechanisms while being encouraged almost exclusively to consume and get into debt? – notes President of UOKiK Tomasz Chróstny.

The President of UOKiK urges and encourages the banking sector to offer better long-term savings programmes to customers so that planning and saving for major expenses becomes an attractive alternative to quickly satisfying needs through credit.

To show consumers the benefits of saving, we made a simple simulation. A consumer plans to go on a long-distance trip next year and intends to spend PLN 10,000 for this purpose. He takes out a loan with 12 instalments, assuming an 18.5% interest rate (the current market maximum), plus additional non-interest credit costs of 10%, i.e. PLN 1,000. In this situation, a credit-based trip will cost approximately PLN 12,133, with a monthly instalment of PLN 1,011. By saving, the consumer can achieve the same goal mainly with significantly smaller monthly payments of PLN 815. We assumed a nominal interest rate of 5% (before capital gains tax). The calculations indicate that the cost of the trip through annual savings will be PLN 9,783. Thus, the difference between the cost of a credit-based trip and the cost covered through savings will amount to PLN 2,350 and represent a financial benefit for the consumer. To help consumers decide which path they should take to achieve their long-term and short-term goals, we have developed a Savings Calculator – a new tool designed to estimate the benefits of regularly setting aside a fixed amount in a savings plan.

Plan your savings with the UOKiK calculator

Savings Calculator is a new educational tool developed by the Office to help consumers build responsible consumption habits and calculate what they want to achieve. It allows consumers to choose a strategy tailored to their needs – setting aside money for a specific long-term or short-term purpose – all it takes is the click of a button to change course of action.

With the long-term savings calculator, consumers can calculate the financial benefit they may gain depending on the interest rate of the savings plan and the time horizon. It is just as easy to see how a systematic increase in contributions or a larger one-off cash injection – such as an annual bonus  – will affect your savings plan.

The calculator also supports goal-based saving, i.e. it suggests the required monthly contribution for a savings plan to reach a specific amount within a chosen timeframe, e.g. PLN 50,000 in five years. This option can be useful, for example, for those planning to buy a flat with a mortgage at some point in the future but already want to start saving for the required down payment. However, the goals can be different, such as renovating a flat, purchasing a car, or funding a dream trip. The programme generates a PDF file with a ready-made plan, making it easy to share calculations with others, for example, people organising a long-distance trip together.

The UOKiK website also offers three other financial tools. Early Repayment Calculator allows you to determine how much of the non-interest loan costs should be refunded by the bank if you choose to repay the loan early. Interest Rate Change Calculator allows you to check the approximate amount of your instalment in the event of an increase in interest rates and how much you can save with overpayment. For those who find themselves in a difficult financial situation, we have prepared a form to determine whether they can apply for assistance with loan repayment from the Borrower Support Fund.

To date, borrowers have used our calculators more than 7 million times.

Consumer, please remember that:

• Consistency is key to effective saving. Find out how much you can set aside each month and stick to it until you reach your goal.
• You can achieve your dreams of travelling to even the farthest destinations by putting away relatively small amounts. The key is consistency.
• It is always a good idea to budget an extra 10-15% for unexpected expenses during renovations.
• Already chosen your car make and model? Great! However, when planning your savings, consider not only the purchase price of the car, but also insurance and maintenance costs.
• Property cost is not the only expense you will face. Plan for additional costs like notary fees, finishing and furnishing the flat, and insurance.