2024-04-30 11:10:43
Jūratė Cvilikienė, head of the Swedbank Finance Institute, and Marius Dubnikovas, vice president of the business confederation, financial analyst, spoke on this topic in the “Open conversation” program of “Žinių radio”.
It is better not to follow such logic
“It is better to be a king for one day than to live an average life all my life” – there are quite a few Lithuanians who are guided by this principle, observes J. Cvilikienė. Such values are especially evident in moments of crisis, for example, when there was very high inflation or when the war in Ukraine started.
In such periods, the logic is as if everything is about to collapse, and there is no need to trust the authorities and institutions. However, it is necessary to understand that an adult must take care not only of today, but also of the future.
If those with lower incomes think that it is not worth putting aside 100 euros per month and that such an amount is insignificant, they are wrong. The economist urges you to look at people of retirement age – have you ever wondered how they accumulate considerable sums?
If we compare those 60 and older, their savings are among the highest of any age group simply because of consistent savings.
According to the financial analyst, the current generation is simply used to living well. “We actually had the last crisis in 2009, although we had the coronavirus and the war crisis, but they did not affect us economically, as in 2009. Since 2009 a new generation has grown up that doesn’t know what economic crises are, they are less protective of themselves,” M. Dubnikovas taught.
According to data from the Organization for Economic Co-operation and Development (OECD) and considering inflation, from 2019 Lithuania‘s real income grew the most among all OECD countries. There is a danger in this situation, because people think that their salary will increase by 10 percent next year as well.
“In any case, we are a welfare state: there is security, social security is ensured, there are pensions – higher or lower, but they are there,” M. Dubnikovas said. For example, the biggest savers in the world are the Chinese, where there is no social insurance. As much as you save, you will get in your old age. You don’t have children because there was a one-child policy, which means that no one will take care of you but yourself. The Chinese save about 40 percent. from his salary, if we could imagine – on average, he puts aside half, and someone puts even more”.
Therefore, Lithuanians are exceptional when it comes to saving. Statistics show that the savings rate has been close to zero over the last twenty years, and in some years even negative. This means spending more than you earn.
However, J. Cvilikienė adds that if people bought only what they needed, the economy would stop. “There is no need to move to the other side, and always when we talk about finances, about financial literacy, we talk about the balance,” said the economist.
Experts see that Lithuanian youth are particularly happy, and the consumer confidence index is so high that even economists themselves cannot explain the reason. However, surveys show that especially for young people, money matters cause stress and there are challenges in finding a balance.
It is pointed out that young families and young people who, unlike people of retirement age, are not supported by the state, are facing problems. It is noticed that mostly single persons face financial difficulties, the situation of dependent minors is very complicated.
As with every age, there are different challenges. “Last week I was in an assembly hall that was full of young people and I watched what they asked, what they were interested in. It is interesting for them, the need for knowledge is high. On the other hand, it is not very clear where to get information,” she commented. The children asked the simplest questions: what to know when working in the summer, how to find a job, how to start a business, how to develop ideas for new activities.
Financial literacy is taught too late in school, so even adults do not have the necessary knowledge to pass on to their offspring. Due to the lack of verified information, young people are stressed about their daily finances.
You want to earn a million here and now
Residents feel quite safe that if something happens, the state will take care of them. But does the existence of the welfare state and the knowledge that the states will take care of them allow us not to think about the future?
The interviewed economist claims that one of the reasons for not saving is children’s lack of financial literacy – education about managing one’s money would be useful even in kindergartens.
Another reason is the influence of social networks, where young people see rich influencers. The participant of the radio show was also stunned by the conversation with the 19-year-old. a young man who said that his life was over because he didn’t have time to earn a million. The guy doesn’t want to work for another fifty years, he wants everything now.
However, it would be worthwhile to look to the future and plan for it. Having savings for three months is only one step towards financial freedom, according to M. Dubnikovas.
“There should be four steps in financial hygiene. The first step is to forget the institutions that give consumer credits. If you have consumer credit and pay 16-18 percent. interest, no amount of financial freedom will reach you, you are already going completely to the pit and killing yourself. Forget these things, forget all the gold, platinum cards, although the bank will not like this thing. It is not the smartest thing to pay for plastic that is painted gold and have a gold card.
The second step is to have at least three months of expenses accumulated, it can be in cash, it can be in an account, on a card, in case something happens.
The third step is prohibitions. Life insurance is essential, especially if the primary income earner were to fall out of line, the family could find another mom or dad to prepare for. Another insurance is critical illnesses. In Lithuania, every fourth-fifth over 60 year old. a person has a heart attack, stroke or oncological disease. However, 70 percent recovers after 12 months rehabilitation.
The fourth step is 10 percent. setting aside savings from monthly income,” the financial analyst named.
He adds that people are already quite free with investments, they are interested in bonds, shares, investment funds. So some people save and earn even more by investing, this trend will strengthen in the long run.
Although in the social space you can still see how celebrities who have just bought an apartment brag to everyone, now the generation is already changing. M. Dubnikovas urges you to pass by schools and pay attention to children’s clothing: big clothes, dull colors. It seems to indicate that the era of bright clothes is over, and so is the wider perception of the world.
In Maslow’s pyramid of needs, it can already be seen that basic needs are satisfied, you are on the path to self-realization, you are investing in yourself – you want to live not only well, but also as long as possible.
“And the income has changed dramatically. Twelve years ago, in 2012, the average salary was 800 litas, now we have practically 1,500 euros,” he compared, adding that everything cost the same. Although real estate was a bit more expensive, the same fuel cost the same – about 5 litas, which would be 1.7 euros per liter.
Such an amount does not seem large, and having a car is not so necessary. Some people who have reached adulthood are not even going to get a driver’s license, although it used to be the greatest achievement. Now you can rent a car, scooter, use shuttle services or travel by public transport.
2024-04-30 11:10:43