Miglė Grybinienė. The Paradox in Lithuanians’ Bank Accounts

The year 2026 brought Lithuanian residents both greater financial freedom and a peculiar paradox. The reform of the second pension pillar returned billions of euros to people’s hands, savings held in banks increased further, yet at the same time inflation once again approached 6%. We have more money. The question now is what to do with it?

One option remains very familiar to many Lithuanians: do nothing. Keep the money in an account where we can see it and access it at any time. We associate savings with security, and we are used to assessing that security very simply: if I have not lost a single euro, then I have lost nothing.

Yet this is precisely where one of the less noticeable financial illusions lies. The amount of money in an account may remain the same, even though what we can buy with it has already changed.

So it is worth stopping here and looking at what this means today.

In July, annual inflation in Lithuania stood at 5.9%. If this rate of price growth persisted for a full year, a basket of goods and services costing €10,000 today would cost approximately €10,590 a year from now. The same €10,000 in an account would still be there after a year, but in today’s money its purchasing power would be approximately €557 lower.

This by no means suggests that money should not be kept in a bank account. That is exactly what an emergency fund is for - if the money is needed tomorrow, it should be easily accessible. But an emergency fund and all of our savings are not the same thing.

And this is where a much more uncomfortable question arises: at what point do we actually begin to lose money while trying to protect it?

The first data send a signal

This is where the reform of the second pension pillar provides an interesting context. It allows us to see what we tend to do with money once it reaches our hands. During the first quarter of the year, 514,000 people withdrew from the scheme and were paid around €2.9 billion. Most of these payouts reached residents in April. By the end of May, Lithuanian households held a total of €30.3 billion in credit institutions, of which almost three quarters - €22 billion - consisted of overnight deposits.

Of course, these figures do not allow us to state unequivocally that the funds withdrawn from pension funds were the very funds that ended up in bank accounts. However, the overall picture clearly reflects our financial habits - we tend to keep a large share of our savings immediately accessible, even though it is unlikely that we will need all of it tomorrow.

A few thousand euros set aside in case the car unexpectedly breaks down and a few thousand euros that will not be needed for the next ten years look the same in a bank account. Financially, however, they are not. For the former, accessibility matters most. For the latter, time becomes critically important.

So what should we do with that money to prevent it from losing value?

In Lithuania, the answer to this question was fairly predictable for a long time - real estate. Curiously, we are considerably more cautious when talking about financial investments, yet bolder when the same investment has walls and a roof. Statistics also show that Lithuanians view real estate as an investment - according to the Bank of Lithuania, in Vilnius alone, around 40% of homes are purchased for purposes other than the buyer’s own residence.

However, owning real estate, although it may seem safe and tangible, sets a fairly high bar - it requires substantial capital. If the average amount paid to a resident who withdrew from the second pension pillar was around €5,400, and nine out of ten payouts were below €10,000, it is clear that in most cases this amount will not be enough to buy a home.

And here another paradox emerges: if we primarily associate investing with purchasing real estate, it may seem that the only option is to keep saving. Yet while we wait for our savings to become ‘sufficient’ for such an investment, they gradually lose purchasing power.

Especially since the threshold for what counts as a ‘sufficient’ amount is now far more relative. The dividing line between ‘I’m still just saving’ and ‘I can already invest’ is no longer so clear. It is possible to start with smaller amounts, and there is more than one option: funds, bonds or shares. For those who feel closer to the real estate market, one possibility is crowdfunding. It allows people to finance real-estate-related business projects with smaller amounts and, even before investing, see the interest rate and term offered for a specific project.

Of course, each of us decides where to keep or invest our savings according to our own circumstances. But if we keep money in an account for the sake of security, inflation of almost 6% forces us to look at that security somewhat differently: the amount in the account may remain unchanged, but that does not necessarily mean we are losing nothing.

Doing nothing is also a financial decision. And it has a price. So perhaps the question today is different: what do we actually mean by financial security?

Article link: https://www.lrt.lt/naujienos/verslo-pozicija/692/3033231/migle-grybiniene-paradoksas-lietuviu-saskaitose