Miglė Grybinienė. Second-Pillar Pension Funds Are on the Way: April – a Time for Decisions

The long-awaited opportunity for individuals to decide for themselves what to do with their accumulated second-pillar pension funds has already become a reality. However, the real moment of decision will arrive soon – in April, when these funds start reaching bank accounts. This moment will serve as a financial literacy test for Lithuanians, revealing how well we can plan, assess risk, and make long-term decisions.

Although Lithuania is only now preparing for this stage, a global trend is already emerging, showing that the logic of investing, especially among younger people, is changing. This is a signal worth paying attention to.

Between Planning and Impulse

In recent years, a phenomenon has emerged worldwide that is changing the very concept of investing. Increasingly, young people are entering financial markets not as long-term investors but as players seeking quick results.

This transformation in investing is clearly reflected in the numbers. The 2023 international study by the CFA Institute and FINRA, covering several major financial markets, revealed that approximately 44% of Generation Z investors made their first market steps with cryptocurrencies, while around one-fifth currently invest in NFTs or other digital assets.

Foreign analysts increasingly refer to this phenomenon as “investing gamblification,” where investing takes on more and more characteristics of gambling. Fast transaction cycles, uncertainty, and instant excitement all work similarly to betting in a casino: they provide a short-term sense of satisfaction that encourages repeated action, even if the outcomes are not always successful.

This behavior is further reinforced by social media. CFA and FINRA studies show that almost two-thirds of Generation Z investors acknowledge that financial apps and social media influencers influence their investment decisions – from what to buy to when to sell. Nearly half give in to the fear of missing out, or FOMO. When emotions take over, investing gradually turns into gambling, and impulse increasingly overrides logic.

This model may seem effective in the short term, when market growth creates the illusion that risk management is unnecessary. However, history shows that patience and consistency are especially important in investing – even small, regular contributions over time create more value than impulsive attempts to “time the market.”

Numbers support this: according to international investment studies, including analyses by Morningstar, investors who frequently change positions earn lower returns, with differences reaching 1–2 percentage points per year. In other words, patience literally pays dividends.

Why Is It Important to Talk About This in Lithuania Now?

What is being observed in foreign markets today is not a distant trend – the conditions exist in Lithuania as well. Foreign researchers have noted that “gambling-like” behavior is closely linked to financial literacy. Studies show that the lower a person’s financial literacy, the more their decisions are driven by emotions rather than analysis. Such a lack of knowledge creates the environment in which investing is increasingly confused with gambling.

And Lithuanian financial literacy so far is far from impressive. Research by the Bank of Lithuania shows that citizens’ financial literacy has declined over a decade from 62 to 56 points, with only 23% reaching the minimum baseline level of 70. Digital literacy indicators are even lower – 45 points compared with a global average of 53, and only 16% of the population meets the minimum level.

Weak financial preparedness is particularly evident among the youngest investors. A 2024 study, “Assessment of the Impact of Youth Financial Literacy on Savings,” found that the average financial literacy score of Lithuanian youth (ages 18–30) was only 5.38 out of 10.

Researchers note a clear correlation – the higher the literacy level, the more likely a person is to invest purposefully, understanding risk and time as key factors. In other words, lack of knowledge often translates into impulsivity, and impulsivity leads to unstrategic decisions.

This is why the funds soon arriving in Lithuanian accounts, withdrawn from the second pillar, will serve as a true test of our financial maturity. When investment decisions are made not from a desire to “win quickly,” but from an understanding that returns are built through consistency, a true investment culture is formed.

Investing is not a spontaneous act. It is a process that requires a plan, discipline, and a clear direction. Those who invest guided by emotions or short-term trends often become victims of market fluctuations, while a mature investor understands that success is not accidental – it depends on the ability to remain calm, assess risk, and make decisions based on analysis rather than impulse.

And while the world increasingly talks about “gamblification” in investing, Lithuania still has the opportunity to show a different path – one in which investing becomes not a short-term gamble to “win,” but a conscious way to create long-term value. After all, in the end, it is not the one who risks the most boldly who wins, but the one who thinks the farthest ahead.

Read more: https://www.lrt.lt/naujienos/verslo-pozicija/692/2821231/migle-grybiniene-antrosios-pakopos-pinigai-pakeliui-balandi-sprendimu-metas

More infomation:

https://www.profitus.com/news/pension-reform-will-your-money-work-for-you-in-the-future

https://www.profitus.com/news/what-did-estonias-pension-reform-show

https://www.profitus.com/news/the-biggest-mistake-with-pension-reform-money-impulsive-decisions

https://www.profitus.com/news/pension-money-a-purchase-or-a-decision-that-creates-value

https://www.profitus.com/news/pension-reform-the-first-step-into-the-power-of-compound-interest