Should I have my Personal Savings in a Bank or Invest Elsewhere?

Why Saving Alone Won’t Make You Wealthy in Pakistan
Is Your Money Working for You?

You work hard for your money—but is your money working for you?
In Pakistan, where inflation continues to rise, keeping all your wealth in savings in a Bank might be costing you more than you realize.

Take the story of Minahil.

Watch the full testimonial
Minahil, a 32-year-old working mother, always believed that owning an apartment in a prime location was beyond her reach. With rising expenses and a growing family, she focused on saving whatever she could each month, keeping her money in a bank for security. But as inflation soared, she realized that her savings were losing value instead of growing.

With Dao Proptech, a digital real estate investment platform, instead of letting her money sit idle, she took a small but significant step. She started investment with just 5 square feet and committed to adding more with her monthly savings.

Fast forward two years, and Minahil’s decision has paid off. Her investment has grown at an annualized rate of over 30%, far outpacing inflation and traditional bank savings. She is now well on her way towards gradually fully owning an apartment at her own pace.

Minahil’s journey proves that wealth isn’t just built by saving — it’s built by making your money work for you.

Real estate isn’t just for the wealthy, with the advent of technology it has now become possible for anyone and everyone to invest in real estate, who wants to take a step toward financial growth.

As Pakistan’s economy evolves, the decision between saving and investing is more relevant than ever. Many Pakistanis, especially working professionals, women, and youngsters struggle with financial planning.

Should they rely on just savings, or is it time to explore investment opportunities that offer long-term financial security?

Pakistan’s Financial Landscape: Understanding the Gaps

To make informed financial decisions, it’s essential to understand Pakistan’s current economic landscape. Two critical indicators define a nation’s financial health:

1. Savings-to-GDP Ratio
   This metric shows how much of a country’s total income is being saved, which determines the availability of capital for future investments.
2. Investment-to-GDP Ratio
   This ratio reflects how much capital is being invested into businesses, infrastructure, and national development to drive economic growth.

Pakistan’s figures in these areas lag significantly behind regional counterparts, limiting economic expansion and personal wealth accumulation

Why Keeping All Your Savings in a Bank is a Mistake

1. Inflation Erodes Savings:
   If your savings is sitting idle in a Bank, you are losing purchasing power every year. In 2023, Pakistan faced a staggering inflation rate of 29%, a harsh economic reality that has deeply impacted people’s finances. Despite this, many individuals continue to keep their savings in current accounts, unaware of how inflation silently erodes their wealth.
   Consider this: if you had PKR 100,000 in your current account a year ago, its real worth today has diminished to just PKR 71,000. This means that the same 100,000 you have now can only buy goods and services worth PKR 71,000 compared to what it could buy a year ago.
   Let’s put this into perspective. A year ago, a person could purchase 10 dresses with PKR 100,000. Today, the same PKR 100,000 would only be enough to buy 7 dresses. This stark decline in purchasing power underscores the devastating effects of inflation, which effectively acts as a “hidden tax” on stagnant savings.
   To protect your wealth from the corrosive impact of inflation, it’s crucial to explore alternative investment options that can yield returns above the inflation rate. From real estate to stocks or even government-backed securities, proactive financial planning is key to preserving and growing your hard-earned money in such volatile economic times.
   The lesson is clear: letting your savings sit idle in current accounts isn’t just inefficient—it can be financially damaging.
2. The Cost of Missed Opportunities:
   While inflation erodes the value of your savings, keeping all your money in a bank also means missing out on opportunities to grow your wealth. Historically, asset classes like real estate, stocks, and gold in Pakistan have outperformed the meagre returns offered by savings accounts.
   Consider this example: if you had invested PKR 100,000 in real estate with an annual return of 28%, your investment would have grown to PKR 128,000 after the first year. By the second year, with compounding, this amount would increase to PKR 163,840 and achieve almost 200% growth in 3 years. In contrast, if you left the same PKR 100,000 sitting idle in savings, it would still be just PKR 100,000, losing purchasing power with every passing year due to inflation.
   This stark difference highlights the financial setback caused by missed opportunities. Investments in growth-oriented assets like real estate not only safeguard your wealth against inflation but also provide the potential to significantly multiply your capital over time.
   The lesson is clear: savings accounts are suitable for short-term liquidity needs, but they are not designed for wealth creation. To build a secure financial future and make the most of your hard-earned money, it’s essential to diversify your portfolio and invest in high-yield opportunities like real estate, stocks, or other growth-focused assets.

Historically,

• Bank savings accounts offer an average return of 10 to 12% annually.
• The US dollar, which was valued at PKR 25 in 1992, has grown at an average rate of 7.8% annually.
• Gold, which was priced at PKR 6,350 per tola in 1992, has surged to PKR 731,400, reflecting an annual return of 15.47%.
• The KSE-100 stock index has delivered an average return of 13.1% yearly over the last 30 years
• Real estate investments have generated an average return of 15%.
• Developmental real estate has outperformed all other asset classes with an average annual return of 28%

Don’t let the cost of missed opportunities hinder your financial growth—start planning and investing wisely today.

Three Steps to Make Your Savings Work for You

1. Build a Smart Savings Strategy
   • Keep 3-6 months’ worth of expenses in cash for liquidity.
   • Invest any additional funds into high-yield assets.
2. Diversify Your Investment Portfolio
   A Balanced Investment Portfolio Could Include: 
   • 50% in real estate for stable, long-term growth.
   • 30% in stocks to take advantage of market gains.
   • 10% in gold to hedge against inflation.
   • 10% in cash or fixed-income assets for liquidity.
3. Leverage Technology for Smarter Investments
   • Real estate tokenization platforms like DAO PropTech make it possible to start investing in premium real estate with small amounts, providing an accessible and affordable entry point for all investors.

Conclusion: Savings vs. Investment

Relying solely on savings is a missed opportunity. While savings serve as a financial cushion for emergencies, they should not form the foundation of your wealth-building strategy. Investing in real estate, stocks, gold, and other high-growth assets is essential for long-term financial security and wealth accumulation.

Pakistan’s economy is at a turning point, and real estate alone is projected to contribute more than 10% to GDP. By investing strategically, individuals can protect their wealth from inflation and capitalize on high-growth opportunities.

Don’t let your money sit idle. Make it work for you. The choice is yours.