In times of economic uncertainty, many Ukrainians are trying to preserve their savings, traditionally choosing to keep cash at home. However, this seemingly reliable method has significant drawbacks, especially in the long term.
Why keeping dollars at home is becoming unprofitable
Recent years have shown that even the world's reserve currency, the US dollar, does not protect against currency depreciation. A telling example: if in 2020 a certain set of goods cost $100, today the same basket will cost $120. And if we look deeper into history, over the past 10 years the purchasing power of the dollar has decreased by a third.
In addition, keeping cash at home carries additional risks: from banal theft to damage to banknotes or loss due to force majeure. But the main thing is the lost opportunities to increase capital.
OVDP as a modern alternative
Ukrainian government bonds (OVDP) are not just an alternative to keeping currency at home, but a full-fledged investment instrument. In essence, by purchasing OVDP, you are lending money to the state, which guarantees its return with interest within a certain period.
Investment security
Many are currently concerned about the reliability of government bonds, especially in times of war. However, it is worth paying attention to a few important facts:
- Ukraine has never in its history declared a default on domestic obligations
- Even in the crisis year of 1998, when the country's GDP fell by 40% and the dollar exchange rate doubled, all payments on domestic bonds were made on time.
- Today, Ukraine has the largest volume of foreign exchange reserves in history
- The country is receiving unprecedented support from international partners, including IMF and World Bank programs.
Practical advantages of government bonds
Government bonds have a number of significant advantages for a private investor. First of all, it is a guaranteed income - you know in advance how much you will receive and when. The state clearly sets the interest rate, and interest payments are made on a fixed schedule. At the same time, you choose for what period you are willing to invest your funds - from several months to several years.
The convenience of investment management is another significant advantage of government bonds. Unlike cash, which needs to be physically stored somewhere, bonds exist in electronic form in your securities account. If necessary, they can be sold on the secondary market without waiting for the maturity date. And the purchase process is as simple as possible - just contact a bank or a licensed broker.
Government bonds also have several nice bonuses for the investor. For example, income from government bonds is not subject to personal income tax, which increases the real return on investments. If necessary, bonds can be used as collateral for a loan. And if you choose foreign currency government bonds, you get additional protection against fluctuations in the hryvnia exchange rate.
How it works in practice
The process of investing in government bonds is simpler than it might seem at first glance. You need:
- Choose a reliable intermediary – a state-owned bank or broker
- Open a securities account
- Choose the type of bonds (hryvnia or foreign currency) and the investment term
- Buy bonds
Patriotic aspect
By investing in government bonds, you not only save and increase your own funds, but also support the economy of Ukraine. The state directs the funds raised to strengthening the country's defense capabilities.
What is important to consider
When choosing government bonds as an investment instrument, you should consider:
- Minimum investment amount
- The term for which you are willing to invest
- Investment currency
- Reliability of the intermediary for buying bonds
For those who previously kept their savings at home, government bonds can be the optimal solution - they are both protection against inflation, relatively good income, and support for the Ukrainian economy in difficult times.
Result
In today's environment, keeping foreign currency at home is becoming less and less of an effective way to manage savings. Government bonds offer not only a reliable alternative, but also an opportunity to earn additional income and contribute to strengthening the Ukrainian economy. This is especially important now, when the country needs domestic investment for reconstruction and development.
The material was prepared based on expert comments. Kateryna Butko, a certified financial advisor and advisor manager at Smart Family Office, and Alina Shukh, COO of Smart Family Office.