In 2016, only 3% of respondents could have lived for more than a year from their savings, this year – already 19%. Meanwhile, the share of residents whose savings would last at most three months decreased from 57% to 28%.
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According to Dr. Dalia Kolmatsui, Head of Private Client Services at Artea Bank, this change shows that residents not only save more often but also accumulate a larger real reserve.
“A larger reserve gives people more time to adapt after losing part of their income, avoid rushed borrowing or selling investments at an unfavorable time. However, savings alone do not guarantee financial security – it is important to plan in advance what portion is allocated for unforeseen cases and what for longer-term goals,” says Dr. D. Kolmatsui.
More than 8 out of 10 save, more than a third invest
According to the survey, more than 8 out of 10 Lithuanian residents save. A decade ago, two-thirds were savers. According to Dr. D. Kolmatsui, the high number of savers helps explain why the financial reserve accumulated by residents has grown significantly over this period.
A distinct change is also seen in investing. This year, 35% of Lithuanian residents invest, last year it was 27%, and in 2016 – only 13%. Moreover, one in five investing respondents allocates more than 200 euros per month for this.
“Saving and investing serve different functions. Savings primarily help accumulate an easily accessible reserve for unexpected situations, while investing is more suitable for longer-term goals. It is encouraging that residents not only save more often but also invest more actively – this shows greater attention to their financial future,” notes Dr. D. Kolmatsui.
Financial plans are made more often, but their duration is shortening
Currently, just over a quarter of respondents have a personal or family financial plan – almost twice as many as a decade ago, when 15% of residents had one.
However, among those with a financial plan, more are looking only at the near future. More than 4 out of 10 have a plan for up to two years, although in 2016 such plans were less than a third. Only 8% of respondents with a financial plan plan for more than ten years, compared to 20% a decade ago.
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“Changes in purchasing power, interest rates, and real estate prices affect residents’ behavior, habits, and investment-related choices.
Meanwhile, increased uncertainty, geopolitical tensions, and new risks force residents to shorten personal financial planning horizons, review financial plans more often, and seek more diversified investment solutions,” comments Indrė Genytė-Pikčienė, Chief Economist at Artea Bank.
According to the survey commissioned by Artea, more than 8 out of 10 residents plan their income. Although almost everyone partially anticipates expenses, more than a third plan only major purchases, and 60% plan all expenses.
“Residents’ financial resilience has clearly strengthened, but there is still room for improvement. More people have a financial plan, but the planning period itself is shortening. A budget for the coming years helps manage daily finances, but it is not enough for goals such as housing, children’s future, or retirement. Short-term and long-term planning should be done together,” summarizes Dr. D. Kolmatsui.
The plan advises to foresee three periods
The expert advises separating daily expenses and upcoming purchases, a reserve for unforeseen cases, and longer-term goals in the financial plan. When planning a monthly budget, the 50 / 30 / 20 rule can be used as a starting point: about half of the income for essential expenses, 30% for wants and non-essential expenses, and the remaining part for saving and investing. These proportions should be adjusted according to one’s income, commitments, and goals.
The financial cushion should be easily accessible and amount to at least 3–6 months of essential expenses. Those with unstable income or more financial obligations may need a larger reserve.
“Financial cushions or money needed in the near future should not be invested. Investing is more suitable for longer-term goals, and periodically allocated smaller amounts help reduce the risk of investing all funds at an unfavorable time. The most important thing is that the chosen strategy matches the goal, period, and risk acceptable to the person,” concludes Dr. D. Kolmatsui.
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