There is growing concern around the world that Generation X, Millennials, and Z are not financially literate enough to manage the capital they will inherit from Baby Boomers. About what legacy Ukrainians have received, the publication minfin.com.ua said Alina Shukh, financial advisor and operations director of Smart Family Office.
By data Cerulli Associates, by 2045, the generations following the baby boomers will receive 84.4 trillion dollars, most of which (72.6 trillion) will be passed on to heirs.
They will receive them from American baby boomers, who make up 20% of the country's population but own 52% of the wealth.
Baby boomers, born between 1946 and 1964, were mostly non-war veterans, living in a period of strong economic growth, falling interest rates, reduced construction, and rising real estate prices and high incomes.
Ukrainian realities
The contrast with Ukraine is striking. According to Postmen, 34% Ukrainians have no savings at all, 25% have less than a month's worth of savings, and 27% have less than six months' worth of savings. Even before the full-scale invasion began 54% Ukrainians declared about the lack of savings.
Why did this happen? The answer lies in historical, economic, and social factors that made capital accumulation virtually impossible for Ukrainian baby boomers.
Historical obstacles to savings
- Soviet legacy
In the USSR, money often had no real value due to the shortage of goods. At the beginning of 1991, citizens of the Ukrainian SSR held 84.3 billion rubles in accounts with the Sberbank of the USSR. These savings were forced - simply because there was nowhere to spend them. But with the collapse of the system, these funds simply disappeared, leading to the loss of most of the population's savings and capital for children, and undermining confidence in any investments for an entire generation.
- The economic collapse of the 1990s
1993 became a symbol of economic collapse: 1993 became a symbol of economic collapse. GDP fell by 14.2%, inflation reached 10 256%, and real wages were only 6% from the 1990 level. Most citizens were forced to spend all their savings just to survive.
- Failed privatization
Instead of creating a broad class of owners, privatization led to the concentration of assets in the hands of a small group of oligarchs. According to the World Bank, by 2004, 751% of Ukrainian enterprises were controlled by oligarchic groups.
- Instability of the 2000s
The beginning of the millennium brought hope for stability, but it quickly dissipated.
During the 2008–2009 crisis, Ukraine's GDP fell by 15.11 trillion, one of the worst in the world. The annexation of Crimea and the start of the war in Donbas in 2014 led to a drop in GDP by 6.61 trillion and a devaluation of the hryvnia by 971 trillion.
The “bank crash” of 2014–2017, when 87 troubled banks, which concentrated 30% of total assets, were withdrawn from the market. Although this was a forced step to clean up the banking system, it undermined trust in the banking system and led to the loss of savings of many Ukrainians.
- Modern challenges
COVID-19 and the full-scale Russian invasion in 2022 were new blows to the economic stability of Ukrainians. The pandemic caused GDP to fall by 4% in 2020, and the 2022 war led to an economic decline of 29.1% and record inflation of 26.6%.
Lack of investment instruments
Unlike developed countries, where dozens of investment assets are available, the Ukrainian stock market remains underdeveloped. After the 2005 boom and 2014 slump, it is characterized by low liquidity, weak private investor involvement, and a dominance of government bonds. According to the National Securities and Markets Commission, in 2021, the trading volume on the Ukrainian stock market was only 2.91% of GDP, compared to 2001% in the United States.
Having lost trust in the banking system, Ukrainians limited themselves to investing in real estate and storing cash. currencies, mostly US dollars. According to the NBU estimates, the population has about 50 billion US dollars in its hands.
Although the opportunity to invest in foreign securities has been available since 2017, it has not gained popularity due to low awareness, weak protection of investor rights, and regulatory restrictions.
Low level of financial literacy
Even if investment opportunities were available, it would be difficult for Ukrainians to create capital due to their low level of financial literacy. This is clearly illustrated by the following facts:
General level of financial literacy
According to a 2021 USAID study, the financial literacy index in Ukraine is only 12.3 points out of a possible 21.
Using payday loans:
- 13% of the adult population uses the services of microfinance organizations. In 2023, 3,886,875 were issued to Ukrainians microcredits for the amount of UAH 18.5 billion.
- 67% borrowers take out loans to cover daily expenses. Financial fraud:
- Since the beginning of 2023, the number of social engineering and phishing cases has increased by 20% compared to the same period in 2022.
- According to the National Bank of Ukraine, in 2022, fraudsters stole more than UAH 480 million from the accounts of Ukrainians.
Gambling
- According to KRAIL, in 2023 the number of registered gambling addicts increased 8 times, reaching 3.7 thousand people.
- 57% gamblers can't explain how interest works in gambling.
Financial education
- Only 20% schools in Ukraine include elements of financial literacy in their curricula.
- 681% of adult Ukrainians have never received financial literacy training.
The level of financial literacy of Ukrainians depends on awareness and responsibility, understanding of opportunities, trust in financial instruments and institutions. But the Soviet past, the lack of education in schools, and negative examples of privatization and treatment of minority shareholders did not encourage the population to save and invest money, increasing capital.
First generation investors
The story of Ukraine’s baby boomers is one of missed opportunities caused by economic turmoil, lack of stability, and financial literacy. However, it is also a lesson for future generations.
Today, young Ukrainians have a unique chance to become the first generation to accumulate significant capital. There are all the prerequisites for this:
- Access to global financial markets
- Development of the fintech industry and the emergence of new investment instruments
- Increasing financial literacy through educational initiatives and access to information
Increasing financial literacy, smart use of available investment tools, and a responsible attitude to personal finances are the keys to creating a stable financial foundation.
The future of Ukraine’s financial stability lies in the hands of its citizens. It is time to act, learn, and build a new financial reality for ourselves and future generations. Only in this way can we provide our children and grandchildren with the financial legacy we were unable to obtain ourselves.