The savings book, German’s favorite type of bank account

3 min 53

Germans are enthusiastic savers and love accumulating money in savings or checking accounts. However, only less than 20% invest in the capital market in Germany. Just 7% of assets in Germany are invested in shares. Despite having interest rates near zero, negative interest rates, and inflation, few people change their financial behavior. Many do not even deal with the topic of finance – a recent survey by Union Investment showed that 42% of Germans aged 18-24 rarely or never do so. So what is it about Germans’ savings behavior?

Germans are world champions in saving

Saving has a long tradition in German society. Did you know that the first savings bank was opened in Hamburg in 1778? After that, the trend of saving quickly took off. By 1836, there were more than 300 savings banks in the former German Confederation, allowing Germans to save their hard-earned income in exchange for interest.

Saving continued throughout history, and today Germans are among the best savers globally. Our savings rate is almost 20%, higher only in Luxembourg. Over the past two decades, German households have consistently saved more than 8% of their disposable income. 

Germans love the saving book

Germans certainly like their money even when they have none of it. A few decades ago – when interest rates were still favorable – it made perfect sense to keep money in savings or checking accounts. Despite interest rates around zero, negative interest rates, and inflation, stocks receive no larger interest from Germans. On the contrary, most Germans continue to put their money into low-yield life insurance policies, savings, or checking accounts. 

Those who still save via savings accounts are losing out

Only 7% of German private assets are invested in shares. Only one out of five Germans are active on the stock market. Most rely on bonds and savings accounts. Moreover, Germans are risk-averse, costing them a good portion of their wealth. Did you know that since 1968, there has not been a single period of 15 years or more in which investors investing in the German Stock Index (DAX) made a loss? The minimum return over 15 years was 2.3 percent per year, far above what you get in interest today – namely, nothing. On average, the return was a whopping 8.8 percent! Even those who joined later profited. Anyone who invested in the DAX in 2000 received an average annual return of five percent, despite the crises up until the present day.

Hardly any expert assumes that interest rates will increase again in the near future. As a result, those who still save in savings accounts are losing out. Nevertheless, Germans are holding on to interest-free checking and savings accounts as their preferred investment forms.

Children save like their parents.

Why do Germans cling so vehemently to this counterproductive savings behavior? 

A recent study by Deka Investment, Germany’s fourth-largest fund company, shows that savings and investment behavior are passed onto the next generation. Children invest money the same way their parents did – in low- to no-interest investment products such as savings accounts. 

Traditionalists (born up to 1955) invest in low-interest products in the same way as Generation X (born up to 1980), Millenials (born up to 1996) adopt X’s habit, and Generation Z (born after 1996) do it no differently. Germans continue to save as adults the way they learned to as children, regardless of the conditions.

This savings behavior becomes more severe over time. For example, if parents set aside EUR 50 a month for a child born in 1980, this amounted to EUR 17,500 when the child reached the age of maturity. For a child born in 1990, the figure would be around EUR 14,000; ten years later, only EUR 11,700 would be collected. To save a similar amount for a child born in 2000 would take eight years longer than three decades earlier. 

The time to invest is now.

If you want to build up assets in the long run, savings accounts are not the way to go. There is no more interest on current accounts and savings accounts. Inflation devalues your assets even more. 

If, on the other hand, you invest in a broadly diversified portfolio, for example, with a globally investing ETF, you will double your assets after twenty years. 

Even if you can only set aside a small amount each month, ETF savings plans are excellent for your long-term wealth accumulation. For example, if you invest EUR 200 per month with the Kilimanjaro portfolio from UnitPlus, a portfolio value of almost EUR 110,000 is reasonably possible after twenty years. Click here for the future calculator.

Kerstin Schneider