Why Are Germans Richer Than Ever?
A recent study by the DAT set Bank reveals that Germans are wealthier than ever, ranking Germany as the fourth country globally by total wealth. So, we must be doing something right. However, the UBS Global Wealth Report 2024 shows that Germany has one of the lowest returns worldwide, with a meager 3% per year. This means there’s room for improvement. Let’s explore what we’re doing right and what needs fixing to ensure you can achieve financial success in Germany.
How Much Should You Save?
Germans are known for their high savings rates, and it’s a major factor contributing to our overall wealth. According to the EU, Germans save more, especially during times of economic uncertainty like the COVID-19 pandemic. With a savings rate of 19.3%, nearly 50% higher than the EU average of 13.2%, it’s clear that saving is a priority. If you’re wondering how much you should save, aim for around 20% of your disposable income or net salary. While saving is crucial, it’s not enough on its own.
Why Is Investing Important?
Despite our impressive savings, Germans are falling short in investment returns, with a 3% annual rate of return from 2010 to 2023. This is puzzling, considering the stock market, real estate, gold, and cryptocurrencies have all seen significant gains. The answer lies in where our wealth is kept—36.8% of it is sitting in bank accounts, totaling a staggering 3.4 trillion euros. Additionally, 25.7% of our wealth is tied up in expensive, non-investing pensions. To improve, we need to shift from simply saving to making strategic investments.
How Can You Start Investing?
- High-Yield Savings Accounts: Instead of letting your money sit in low-interest bank accounts, consider high-yield savings accounts to earn more interest.
- Investment Strategies: Book a free meeting with ETAINFI to discuss the best investment strategies tailored to your needs.
- Review Pensions and Insurances: Upload your existing pensions and insurance policies to our free Perfex contract check to identify opportunities for improvement.
Are Germans Starting to Invest?
The good news is that Germans, especially the younger generation, are beginning to invest in regular monthly savings plans. This approach spreads across Europe, emphasizing the importance of investing consistently rather than trying to time the market. A study from the GTA University in Frankfurt revealed that individual investors often underperform when managing ETFs on their own. The key is to diversify and take calculated risks.
Why Is Diversification Key?
Diversification is essential for investment success. Germans tend to diversify with bank accounts and bonds, but there’s room for improvement. Less than 8% of Germans invest in the stock market, compared to 57% of Americans. It’s important to diversify across various asset classes, including stocks, bonds, real estate, crypto, and precious metals like gold. Proper diversification minimizes risk and maximizes long-term returns.
How Can Financial Literacy Help?
A lack of financial knowledge is a significant barrier to better investment returns. The German financial supervisory authority, BaFin, tested financial literacy with three questions. Only 20% of adults could answer all three questions correctly. ETAINFI aims to enhance your financial education with informative videos and resources.
