Personal savings decrease with rising debts

Reduced spare funds for individuals caused personal savings to decline steeply while personal debts sharply increased. As individuals realized huge losses from investing in stocks on credit, guarantee abuses resurfaced while the wallets of office workers became thinner than ever.

Consequently, spare funds per household fell by 800,000 won, from 1.98 million in the early 1998 to 410,000 won, in the second quarter of this year.

Experts forecast that as long as the current spending trend continues, household debts will continue to snowball, leading to side effects such as personal bankruptcies when the economy slows down in a year or two.

The Bank of Korea announced Monday that household spare funds for bank deposits and stock investments after deducting consumption between April and June this year dropped by 10 trillion won from the previous quarter to 6 trillion and 33 billion Won.

As people began to spend more after the IMF crisis, the rate of spending surpassed the rate of savings, dropping surplus funds to one-quarter the level they stood at last year.

Consequently, private savings dropped by 10 trillion won between April and June while household bank loans increased by 3 trillion won from the previous quarter, indicating that 60% of the money invested in stocks by individuals come from their borrowings.

witness@donga.com