These days, spring is definitely in the air and it is perfect to go out to play! Do you have any plan on this weekend? I have to search for the place to go out with my friend after this! Before that, I’d like to talk about “nest-egg savings”.
Mr. Kim, office worker, visits a bank skipping his meal at lunchtime. What makes him run into bank in a hurry? It is ‘nest-egg savings’ which nowadays grab attention from office workers like Mr.Kim. ‘Nest-egg’ savings, or asset-building savings, started to be sold from March 6 this year in 18 years since such savings had been abolished. What brings ‘nest-egg’ savings back to life?
Mr. Kim is recently worried about how to make a good chunk of money to buy his home. One day, the headline of the “Return of the ‘nest-egg savings’ on the newspaper caught his eyes. Unlike other financial products, it gives higher interest maximum 4.6% and tax exemptions to make it easier for office workers like Mr. Kim to accumulate assets through savings.
Once the household savings of Korea reached 20% but since the economic crisis in 2007, as you can see at the below graph, it dropped to 2.9% in 2008 and hits the lowest level among OECD countries. Such a low figure in household savings can reduce the possibility of investment and hinder national growth potential by constricting future consumption.
There are many reasons for the low household savings but here, we will focus on the latest low interest rate. In regard to it, “nest-egg savings” returned in 18 years since it had been abolished. Its name shows the essence of this product. In other words, it is made to make people accumulate their property efficiently. Regarding low interest, that is, the government gives tax support and from that, people can get higher interest effectively. Through nest-egg savings, we expect people can accumulate assets through savings and make stable living foundation.
Sadly, not everyone can make this savings. Worker whose annual salary is below 50 million won and business operator whose general income tax is below 35 million won can make net-egg savings. Also, the subscription period is minimum 7 years and maximum 10 years. In bank’s position, it can control fluctuation more easily through stable long-term financing and prepare for increase of money demand.
Furthermore, the Financial Services Commission will encourage banks to develop various financial products to help ordinary households accumulate their wealth through savings. Also, if there is any part that needs government’s support, the Financial Services Commission will promote it with consultation with related offices. In addition, at the view of long-term, the Financial Services Commission is doing financial education to the children and the youth in order to form reasonable consumption habit and habit of saving money.