Germans save wrongly – and still get richer

Save, save, save: Private households in Germany cultivate a German virtue and increase their assets despite the slump in interest rates. However, economists are concerned about the development.

The people in Germany save like the world champions – and above all because of that they are getting richer overall. According to calculations by DZ Bank, the financial assets of private households are likely to have increased by around 441 billion euros in 2019 to a record 6.6 billion euros.

Compared to 2018, wealth accumulation has accelerated significantly. The growth rate increased from 2.2 percent in 2018 to 7.1 percent in 2019. Rising share prices also had a positive impact. While private investors still suffered price losses on the stock markets in 2018, investors were able to enjoy strong price increases in 2019.

Germans are always saving more

“The greatest part of the accumulation of wealth once again came from the economy of the citizens,” say the economists at DZ Bank. The savings rate of private households is likely to have leveled off at around 11 percent at the increased level of 2018.

The savings rate in Germany has risen steadily since 2014, and in 2018 it was 11 percent according to figures from the Federal Statistical Office. Out of 100 euros of disposable income, 11 euros are put on the high edge.

“Despite extremely low interest rates, citizens are not discouraged in their savings efforts,” says the DZ Bank study. Because saving, as most Germans love it, is no longer rewarded: there is usually no interest on savings accounts, call money, etc., and more and more institutes are even collecting negative interest for particularly high deposits. Banks are thus reacting to the monetary policy of the European Central Bank (ECB), which has kept interest rates in the euro area at an extremely low level for years.

A quarter of private financial assets are “temporarily parked”

“With the phase of extremely low, in some cases negative, interest rates, which has been going on for years, the compound interest effect as an important pillar of wealth accumulation has largely disappeared,” explained DZ Bank chief economist Stefan Bielmeier.

Nevertheless, according to calculations by DZ Bank, around 1.8 trillion euros, a good quarter (27 percent) of the private financial assets of German households, are “temporarily parked” – mainly in the form of sight deposits, which savers can quickly rearrange if necessary.

In a recently published survey by the fund provider Union Investment, almost three quarters (74 percent) of those surveyed stated that they were sticking to the savings book – knowing that it is currently barely generating any income. After all, more than half of savers (56 percent) are therefore aware that there are investment opportunities that promise higher yields at low interest rates. However, more than one in two (55 percent) believe that they can sit out the low interest rate at the same time.

Only a minority of Germans invest in shares

Relatively few people in Germany invest money in stocks or funds. According to figures from the stock institute, around 10.3 million citizens in Germany over the age of 14 held share certificates from companies or equity funds in 2018. That is the highest level since 2007. Nevertheless, Germany remains miles away from other industrialized countries with a shareholder quota of just over 16 percent. In the United States, for example, where the state promotes pension provision more through the capital market, it is over 50 percent.

“The ongoing low interest rate phase requires a change in the saving behavior of private households in Germany. We need a new savings culture in Germany,” warned Bielmeier. “Instead of the traditional fixation on interest-bearing forms of investment, more investments in real assets such as real estate as well as shares, funds and certificates are required. The variety of savings options opens up opportunities for overcoming the investment deficit.”

Germans as wealthy as never before

Experts consider such a rethink particularly necessary because retirement is anything but secure and people are increasingly challenged to make private provision for old age.

So far, the Deutsche Bundesbank has published official figures on financial assets in the second quarter of 2019. According to this, despite the slump in interest rates, people in Germany are as wealthy as never before: Private households’ assets in the form of cash and securities therefore totaled 6,237 billion euros , Bank deposits and insurance claims. The Bundesbank will publish figures for the third quarter of 2019 in January.


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