Status: 10/28/2022 1:05 p.m
Just in time for World Savings Day, the ECB raised the key interest rate again, and interest rates on savings are also rising. However, many Germans were still able to save money during the pandemic, but only every second person is currently able to do so.
Take the coins and banknotes from the piggy bank to the bank and have the interest for the past year written into the red savings book: until recently, World Savings Day was intended to introduce children to the sense of saving. Interest rates had all but died out for many years, and those were bad times for anyone who liked to save in the traditional way. But now the tide is turning. With the increase in the key interest rate by the ECB, there is also something to be gained from many overnight and fixed-term deposit accounts. According to a comparison by the consumer portal biallo.de, fixed-term deposit interest rates have increased almost sevenfold since their record low in spring 2022. On average, one percent interest would now be paid for a one-year fixed deposit. It is a value that has not been reached since 2013.
Don’t miss interest
Call money accounts can also be worthwhile again, says Matthias Urbach, deputy editor-in-chief of the Finanztip money guide – even though they cannot compensate for the currently very high inflation. “Nevertheless, it makes a difference in absolute numbers. It’s interest that shouldn’t be missed.”
Urbach reports that interest rates of up to three percent can now be earned on a three-year fixed deposit. It is mainly specialized banks that offer this. “In my opinion, it’s worth opening an additional account for a call or time deposit.” It is important to only invest with reputable banks, i.e. banks in countries with reliable deposit insurance.
Savings quota of 240 euros per month
But to save, you need money. In the first half of 2021, the Germans apparently still had a lot left of it, the savings rate climbed to a historic high of 18.2 percent – this is shown by data from the Federal Statistical Office. The reason was the corona pandemic. People gave up vacations and restaurant visits; they simply had fewer opportunities to spend money.
After many of the pandemic-related restrictions were lifted, the savings rate fell again. In the first half of 2022, it was 11.1 percent, i.e. roughly at the level of the pre-Corona year 2019. Every German saved an average of 240 euros a month during this time.
In fact, however, it is only every second person who is currently able to put money aside, according to a current evaluation by the German Economic Institute (IW). In 2020, 70 percent of the people in Germany were still able to do this. Because of the high inflation, those who have less than 1,500 euros a month have little financial leeway at the moment.
Saving nation in the fog
Not an easy situation for Germany as a nation of savers, says Martin Weber, a professor of business administration in Mannheim. His research focuses on the human psyche in financial situations. “Saving has also grown historically in Germany and is deeply rooted in the population. This is also proven by proverbs such as ‘save in time, then you have in need’.”
If times became complex and opaque like they are now, uncertainty would increase for many. “Then you persevere, the propensity to consume decreases. You tend to slow down rather than run into the fog,” says Weber. As a result, some people no longer do anything with their money and leave it in their checking accounts. “If the money sits idle, it loses even more value due to high inflation than if I invest it in the safest possible form. You should continue to diversify,” says Weber.
endure inflation
Urbach also appealed to keep a cool head. He recommends having at least three months’ salary banked up for bad times in an account that’s accessible at all times. Those who fear a possible job loss or reduced income due to a recession in the coming year should save even more. You can continue to invest money that you don’t need immediately, for example in an ETF savings plan. “Here you are currently getting even more for your money because of the declines on the stock exchanges.” But you need a lot of staying power, because the stock market prices could possibly continue to collapse.
According to Urbach, it is important to be able to withstand inflation. “We’re all losing, but we have to get through it.” Nevertheless, one should beware of dubious offers that promise high and secure returns. The laws of economics cannot be overridden. Not even on World Savings Day.