The financial cushion of Spanish households: for how long could you maintain your current level of spending?

11/09/2018

Supposing your household were suddenly to lose its main source of income, for how long could you continue to meet your current outgoings without having to apply for a loan or move house?

This was a question in the recent Survey of Financial CompetencesAbre en ventana nueva, conducted jointly by the Banco de España and the CNMV (the Spanish National Securities Market Commission) with of a representative sample of adults (18-79-year-olds) in Spain, to assess the financial vulnerability of Spanish households.

It was found that most people in Spain (52%) live in households that, were they to lose their main source of income, could maintain their spending for at least six months without taking on debt or selling properties; 15% could maintain their spending for less than one month; and 7%, less than one week, were they to face this eventuality.

These percentages vary according to a number of aspects, such as household income, employment situation, the property owned by the household and the region in which it resides (see table below).

Thus, for example, the proportion of individuals who live in “vulnerable households” – understood as those that could maintain their spending for less than one month – is greater among:

• Lower income households: the proportion of individuals in vulnerable households is 30% among those in households with income of less than €14,500, as against 2% among those with income of over €44,500.

• Individuals who do not own their main residence: 25% of individuals who do not own their main residence are in vulnerable households, as against 8% of individuals who own other properties in addition to their main residence.

• Unemployed: the level of vulnerability among the unemployed is 28%, as against approximately 10% among dependent employees and the self-employed. Among retirees this percentage is 16%.

• The regions of Andalusia and the Canary Islands, with a proportion of individuals in vulnerable households of 25% and 23%, respectively, as compared with other regions, such as Aragon, Castile-Leon, Extremadura and the Basque Country where this percentage is around 9%. To understand these results correctly, however, the differences across regions in the incidence of unemployment and labour turnover must be taken into account.