How to preserve savings in times of uncertainty
Since the beginning of the war, most of us have faced questions not only of personal security, but also of financial security.
The dollar rate began to rise rapidly, many businesses stopped at the beginning of the war and we were in a situation of complete uncertainty.
Numbness gave way to adaptation – we began to rebuild our lives between air raids and rocket attacks, gradually restoring business.
Our incomes also began to recover, and along with this, the question arose – how to save the savings that we manage to put aside in the current conditions?
The hryvnia exchange rate has been constantly changing since the beginning of the full-scale invasion – the hryvnia sometimes loses its value, then regains its position, the prices of goods and services against the background of these exchange rate fluctuations increase ineffectively.
What savings options will help not only to save, but ideally also to multiply your funds in current realities – further in the article.
The first option that usually comes to mind is to buy dollars or euros with all the free money and protect yourself from further devaluation of the hryvnia. Let’s start with it.
First of all, you need to decide on the amount of the purchase: for this, ideally, from the total amount of hryvnias you have, you need to subtract the amount of money that covers your current expenses until the next scheduled income (salaries, etc.).
If you buy the currency for all the money, then after a week you will have to sell part of it.
So, with a more or less stable exchange rate, you will lose money on the exchange rate difference between how much you bought this currency for and how much you will sell it for later.
Currently, the average margin between buying and selling currency is about 50 kopecks, so losses on $100 can be about UAH 50. – the money seems to be small, but not too much nowadays.
When we decided on the purchase amount, the next question arises – which currency to choose. There are several options here:
- choose the currency in which you plan to spend in the future. For example, if you are planning a trip to Europe or some shopping there, then of course choose the euro, or a currency in proportion to the following costs/obligations;
- if it’s just savings in order to avoid risks of devaluation of the hryvnia, then buying a dollar and a euro at a parity of 50/50 will help to avoid the risk of a change in the exchange rate. No matter which currency from your currency “basket” strengthens, its price will remain unchanged.
Such a strategy, of course, will not bring you a possible speculative income, but it will help to avoid the risks of price changes of this currency pair on the world currency markets.
The next step is the actual purchase of the selected currency. Currently, there are three options for buying currency for individuals in Ukraine:
1. Cashless purchase of currency from a bank, subject to further placement on a deposit of 3 months or more. To save the course, this option is the most profitable, after all course sale of non-cash currency in most banks is in the range of 37.00 – 37.50.
The NBU currently limits the volume of these transactions to the equivalent of UAH 100,000 per month, but does not limit the number of banks in which you can make such a conversion.
So, if you are sure that you will not need this money for current expenses in the next 3 months, this is the best option. In addition, your money will remain in the banking system and will work to support and develop our economy.
This service is implemented in PrivatBank, Ukrgasbank, Ukreximbank, A-Bank, Loans to Agricole Bank, Credobank, OTP Bank, Bank “Pivdenny”, Raiffeisen Bank, TASkombank, monobank, Acordbank and in PUMB.
2. Purchase of cash currency at the cash desk of the bank.
3. Purchase of cash currency at currency exchange points.
You can view current courses in the mobile application Ministry of Finance and Foreign Exchange.
Gold has always been a safe haven for investors in times of global economic and political crises. And it is gold (as well as US Treasuries) that investors withdraw their funds from riskier markets in turbulent times.
Gold has traditionally been popular in our country as an investment tool for savings.
However, I want to draw your attention to the fact that buying ordinary gold jewelry can be risky. Jewelry products in their price have a high share of the cost of the design and work of the jeweler, however, when sold later, they are valued only as scrap metal itself.
Bank metals should be considered as savings and investments, because their price reflects the real value of this precious metal.
I will add that history knows quite a few cases during which bank gold lost its value.
Ingots of bankable metals have a legal assay level – 999.9 for gold, 999 for silver, 999.5 for platinum and palladium.
Thanks to samples, the price of the ingot is fixed at the time of purchase. Currently offers the service of selling ingots of banking metals PrivatBank and RadaBank
Purchased bank metals can also be placed in a current or deposit account with a bank. You can place deposits with bank metals in Ukrgasbank and Ukreximbank.
However, please note that the Deposit Guarantee Fund’s guarantees do not extend to savings in bankable metals.
Another alternative to save savings is the purchase of military OVDP bonds.
First, the investment reliability of OVDP is guaranteed by the state. During the entire period of OVDP circulation since the beginning of the existence of independent Ukraine, there has not been a single case of default or postponement of the repayment date for the domestic debt.
Secondly, unlike deposits, from investment income under OVDP not removed 18% ppersonal income tax and 1.5% military levy.
Thirdly, they have a competitive yield compared to interest rates on bank deposits, both in hryvnia and in foreign currency.
Comparison of the average yield of deposits and military bonds (in hryvnias)
Comparison of yield on deposits and military bonds (in dollars)
Sources: “Ministry of Finance” and NBU
And most importantly, by buying military OVDP bonds, you not only receive income, but also invest in our victory. Funds raised through the placement of these bonds are used to finance the Armed Forces and support the state budget during martial law.
It is currently quite easy to buy military OVDP bonds. This can be done online through Actionor directly in banks or investment companies: monobank, Privatbank, ICU.
Do not forget about good old deposits. Now, during martial law, the state guarantees 100% return of deposits for individuals – you can not worry that the funds will be lost, even if the bank is liquidated.
But, still, be careful in choosing a bank with excessively high interest rates. Search for information on inspections and recommendations for these banks from the NBU, which stress test results they had before the war.
If the results of the inspections were not optimistic, then, most likely, the condition of the bank could have deteriorated during the full-scale invasion.
If your bank turns out to be insolvent, the payment of your deposit will be made at the expense of the state.
Such payments increase the burden on the state budget and are one of the factors that provoke the growth of inflation, the devaluation of the hryvnia and, as a result, the increase in prices and the growth of the US dollar/euro exchange rate against the hryvnia.
And no increased interest will be able to compensate you for the consequences of these processes.
Below, I considered the average interest rates on deposits of Ukrainian banks.
Hryvnia deposits (excluding VAT and military duty)
Deposit rates in hryvnia for April 24:
- 3 months – 14.13%
- 6 months – 15.06%
- 9 months – 15.24%
- 12 months – 15.56%
Dollar deposits (excluding VAT and military duty)
Deposit rates in dollars for April 24:
- 3 months – 0.8%
- 6 months – 1.01%
- 9 months – 1.08%
- 12 months – 1.23%
Source: “Ministry of Finance“
IWhich investments will be very risky at this time?
Currently, it is better to refrain from buying speculative assets such as cryptocurrencies and shares of any companies, including international ones (the Ukrainian market is still inactive).
Currently, we are observing processes in the world markets that signal a high probability of the beginning of their stagnation, so these are very risky assets at such times.
Nataliya Shishatska, Head of Foreign Exchange Business of the financial portal “Ministry of Finance”