Think Through Every Piece of Advice

Think Through Every Piece of Advice – Learn to Manage Your Money Wisely

Money is an essential part of our daily lives. However, many of us face challenges when it comes to properly managing, investing, or protecting it. Loans, investments, savings, risks – How can we ensure financial stability? How can we protect our savings and investments? In this article, we aim to explain that part of the answer lies in responsible money management and the Deposit and Investor Protection Systems.

Responsible money management is a long-term process that requires a proper strategy. Spontaneous or thoughtless decisions can lead to financial losses. The first step is to evaluate potential risks and understand the protection measures applied to deposits and investments.

Why is it important to think through each financial decision?

Managing money is not just a daily task; it is a long-term process where it’s crucial to choose the right strategy and not rush into decisions. Too often, people make spontaneous and unthoughtful decisions based on impulsive advice or unverified information. This can lead to not only financial losses but also long-term legal consequences.

The first step toward wise money management is to weigh various options and assess potential risks. Remember that every investment or financial decision carries its own risk – therefore, it is essential to understand the protection measures applied to deposits and investments.

Deposit and Investor Protection Insurance – A Guarantee of Safety

In Lithuania, there are two main money protection systems – Deposit Insurance and Investor Protection Insurance, and it’s important to understand their differences:

Deposit Insurance protects funds held by individuals and legal entities in banks, credit unions, and other insured financial institutions.
Investor Protection Insurance applies to financial instruments and money held by investors in investment firms or financial brokerage companies.

Deposit Insurance Object:

Deposits held in banks and credit unions (checking accounts, term deposits, savings accounts, etc.).
Protection is provided up to €100,000 for one depositor in a single financial institution.
In certain cases, specified by the Deposit and Investor Protection Insurance Act, the amount can be higher (e.g., due to the sale of real estate, social benefits, or other compensations).
If a financial institution becomes insolvent, insurance payouts are made within 7 business days.

Investor Protection Insurance Object:

Financial instruments owned by investors (stocks, bonds, investment funds, etc.) and money held in investment accounts.
Protection is applied up to €22,000 for one investor in a single financial institution.
Insurance is activated if the investment company cannot fulfill its obligations to investors.

When are insurance payouts made? Insurance payouts are made when:

A bank or credit union becomes insolvent and cannot return deposits to their owners (in the case of deposit insurance).
An investment company or financial brokerage firm fails to meet its obligations to investors (in the case of investor protection insurance).
In the case of deposit insurance, payouts start within 7 business days of the insurable event.
In the case of investor protection insurance, compensation is paid within 3 months from the date of the insurable event (this period can be extended for up to 3 months).

Non-covered events It is important to note that there are situations where insurance protection does not apply:

Deposit insurance does not cover the Bank of Lithuania, credit institutions, investment companies, and other financial institutions.
Investor protection insurance does not apply to the Bank of Lithuania, credit institutions, financial brokerage firms, financial institutions, pension funds, insurance companies, reinsurance companies, and other collective investment entities.
Deposit insurance does not cover cash held outside financial institutions, or investments in stocks or bonds.
Investor protection insurance does not compensate for fluctuations in investment values due to market changes or incorrect investment decisions.

How to manage money wisely?

Managing money wisely means not just saving but also understanding how to ensure its security and invest it effectively. Here are a few tips:

Diversify your finances – don’t invest all your money in one project or company. Spread your investments to reduce the risk of losses. Also, don’t keep all your savings in one bank – this reduces the risk if something happens to one of the banks or financial institutions.
Check if your funds are insured – make sure your bank or investment company accounts are covered by an insurance system. Find out the insurance conditions and what amount you can safely keep in a credit institution (according to the Deposit and Investor Protection Insurance Act).
Plan and monitor your finances – have a clear budget and financial goals, and review them regularly. Start investing with smaller amounts and regularly review your investments, financial habits, and consult with specialists to optimize your money management.
Listen to advice, but don’t trust blindly – conduct your own analysis and don’t make financial decisions solely based on the opinions of others. Check whether the advice aligns with your financial goals and risk tolerance.

Conclusion: Financial Security as a Long-term Investment

Wise money management is not just about how to save and invest, but also how to protect your wealth from potential surprises. Deposit and Investor Protection Insurance is an essential tool to ensure the safety of your money. It guarantees that your savings and investments are protected up to a certain amount.

Always remember – think through every decision, consult with experts, and conduct your own analysis. Only then can you manage your money wisely and build a sustainable financial future.

You can watch a short informational video about the deposit insurance system here: https://youtu.be/T3HypjAfo00.