Europeans are bad at managing their finances, but Bitcoin fixes that

European millennials have been dealt a bad hand, but Bitcoin will show you the way to financial freedom.

This is an opinion editorial by Imo Babics, CMO of Relai, a Swiss-based Bitcoin-only investment app.

Europeans don’t use their purchasing power and it hurts their pockets. It is estimated that the financial wealth of Europeans would be €1.2 trillion higher if savers had invested their money instead of leaving it in the bank.

Yes, you read that right – keeping money in the bank. Keeping cash in bank accounts for emergencies is despite the high inflation still the most common way Europeans save their money. And only 17% of Europeans said they would own Bitcoin in 2021. Data suggests the number is similar when investing in stocks, with just 15% of Germans doing so (rookie numbers versus 55% of Americans).

The fight is real

A lack of financial literacy and self-doubt about their ability to invest are obvious hurdles, but there are several other reasons why Europeans aren’t smarter about their money:

• Lack of confidence in the financial system: European millennials came of age during the great recession of 2008. Many of them have experienced first-hand how their parents lost their jobs, homes or life savings. You have seen the big banks, the architects of this disaster, go unpunished. This led to a general lack of trust in Wall Street, banks and the financial system as a whole among millennials. Many believe that traditional financial institutions cannot be trusted (rightly so) and that the system itself is rigged.
• Debt: Owning a home is a symbol of stability and security. With property prices soaring in Europe, owning a home often comes with a 30-year mortgage. Add to this car leasing, credit cards and, depending on the country, student loans and all this debt can make it difficult for young people to save and invest as they focus on paying off their debts first.
• Job (in)security: Millennials have only known a challenging job market so far. Most of them entered the workforce after the 2008 financial crisis, faced with a lack of opportunities and stagnant salaries. Just when things were starting to take a turn for the better, her career was dealt another blow by the COVID-19 pandemic, the war in Ukraine and sky-high inflation. All of these things caused widespread job losses and a global economic downturn, making it difficult for them to plan for the long term.
• Lack of financial literacy: Many Europeans lack the basic financial knowledge and skills they need to manage their finances smarter. I will not engage in the debate on whether the lack of financial literacy in the European public school system is a flaw or a feature, but we are not taught about money. Our parents were not taught about money and this ignorance is passed from one generation to the next. Only a quarter of millennials in a PwC study demonstrated adequate financial literacy. They feel intimidated by the investment process, leading to a crippling fear of making a mistake and losing money.
• Short-Term Thinking: A high time preference or valuing the present over the future and sacrificing long-term benefits for short-term gains is not a new phenomenon. To quote a late ’90s cult classic, ‘Fight Club’: “Advertising makes us chase cars and clothes, do jobs we hate so we can buy shit we don’t need and the things you own.” , end up owning you.” In the world of uncertainty we currently live in, short-term thinking is more convenient as the benefits of investing in the present don’t exist.

Bitcoin: A New Hope

Many bitcoiners, myself included, will tell you that discovering bitcoin and going down the rabbit hole had a significant impact on our lives and the way we think about money and saving. One of Bitcoin’s strengths, I think, is that it encourages a low time preference, encouraging you to forgo instant gratification and instead look to the future. A low time preference leads to savings, it makes you think before you do something and consider the consequences of your decisions. This mindset is essential for long-term financial stability and growth, and Bitcoin inherently encourages this behavior.

First and foremost, Bitcoin’s limited supply of 21 million coins means that scarcity is a built-in trait. This scarcity protects value over time. And it creates a strong incentive for you to keep your coins instead of spending them.

This mindset can be applied to every aspect of your finances, transform your life and help you break the rat race by saying no to a 30-year mortgage, cutting your credit cards in half, or stopping “saving” your money at your bank. Account.

Bitcoin is more than just speculation

Price volatility is a big problem for bitcoin-curious newbies.

“How can bitcoin be a safe option for my money when the price crashes every time?”

But price volatility is another way Bitcoin changes your time preference. Yes, the short-term negative price moves can be significant, but they have shown strong growth over the long-term. This has encouraged many to view Bitcoin as a long-term investment rather than a short-term speculative asset.

I stated above that Europeans no longer trust the financial system. Bitcoiners will tell you that Bitcoin fixes this too. It is decentralized and operates independently of traditional banking systems, putting custody of your money back into your own hands. Bitcoin will change the world, but before it does, it will change how everyone thinks about money. Helping everyone build long-term financial stability, freedom and security.

This is a guest post by Imo Babics. The opinions expressed are solely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.