Where do Germans store their money? What are the alternatives?

Cash country Germany

There are so many options for cashless payments these days: EC cards with touch and pay, credit cards, or completely contactless mobile payments via PayPal and Google Pay via smartphone. Some stores even accept cryptocurrencies such as Bitcoin. You'd have to assume that the age of cash would slowly come to an end. Not so in Europe and especially not in Germany. Because risk-averse Germans love their cash and hoard it wherever they can. The Bundesbank assumes that hoarding stocks in Germany amount to around 150 billion euros. You may be able to better imagine how much cash that actually is: 150 billion euros in cash means that each of Germany's 82 million inhabitants — including every baby, every elementary school student, every teenager and every pensioner — has stashed around 1,830 euros at home.

In fact, Germans love their cash so much that the volume of cash in this country is growing every year. This is not the case in any other country in the EU. In fact, the volume of cash is increasing across the EU simply because Germany is bringing so much new cash into circulation. Conservative Germans feel safest when they can access their money at any time. After the last global financial crisis in 2008, the distrust of banks among many Germans is still so great that cash is considered safer.

The money sleeps in the accounts

Of course, the Germans do not have all their assets in cash at home. One of the most preferred ways for German savers to store money is still a bank account. Savings accounts and current accounts are estimated at 2.3 trillion euros. This enormous amount is primarily due to the fact that Germans are still among the top savers in Europe. The savings rate is around 10%, which means that Germans save around a tenth of their monthly net income.

But saving is not the same as saving. If you save money simply by abstaining from consumption and leave it in your account, the amount of money may increase slightly, but you won't make a fortune. Quite the contrary: As a result of the zero interest rate policy, banks give an average of around 0.2% interest per year on saved money. Inflation, i.e. the increase in the price level of economic goods and goods, is also rising annually. The inflation rate is currently estimated at 1.4%. For Germans, in real terms, this means that the money they store in savings accounts and current accounts loses 1.2% of purchasing power every year. Experts call this phenomenon asset destruction. It sounds harsh, but it hits the nail on the head. Anyone who hoards cash and lets it slumber in accounts like the Germans does not contribute to wealth creation, but effectively destroys it.

Wealth creation through investments

So what do we learn from this sobering overview? Bunkering money the way the Germans do is the worst option when it comes to creating wealth. Thanks to zero interest rates, accounts no longer yield returns and inflation leads to a loss of purchasing power of the hoarded money. If you want to build up wealth, you must rid yourself of outdated German virtues of hard saving and abstinence from consumption and finally start saving wisely. Invest your savings cleverly and benefit from higher returns. Investments in stocks, funds and real estate are the best opportunities for you to build up wealth.

Saving wisely can be so easy. While Germans are saving by tightening their belts and switching to doing without, Spaniards, for example, are letting their investments work for them. Real estate ownership and investments in real estate are significantly higher in Spain and other EU countries than in Germany. Not only is private property ownership in Spain higher than in Germany, they are generally more willing to take risks and are much more likely to invest their savings in stocks. Around 22% of Spanish households' portfolios consist of equity investments, while in Germany the figure is just 7%. Anyone who invests creates long-term wealth and doesn't even have to forego consumption.