Negative interest rates and strong inflation

Time for a new bank?

Germans are a nation of savers. According to the banking association, Germans have more than €7,100 billion in assets, or about €87,000 per German citizen. Just under 40% of this is invested in savings accounts and fixed-term deposits, is held in checking accounts or is held as cash.

We have long since become accustomed to the fact that savings deposits and fixed-term deposits do not, in principle, earn any interest. In addition, banks, savings banks and credit unions are now charging their customers custody fees or negative interest rates for their savings. These are not isolated cases. More than 350 banks have currently included negative interest rates in their price lists, and the list is growing longer every day. Looking at the general interest rate environment, it is clear that there is currently no end in sight.

Savers are even being burdened twice over. After all, negative interest rates are compounded by inflation. Inflation weighs on assets at an average of 2% a year. Negative interest rates are generally around 0.5%. Saving therefore costs about 2% per year. That means from 10.000 € after 5 years over 1.150 € are missing! In 2021, the inflation rate is even 4%. Experts are currently still divided on whether the devaluation will remain at this high level. If so, the loss in value would be even considerably higher.

Is there an alternative?

Fortunately, there are many ways in which we can invest our money. In addition to savings accounts, we can lend our money to states or companies (government bonds or corporate bonds), invest in real estate or precious metals, or even buy shares, i.e. shares in companies. Which investment form is the right one for the investor depends on the risk tolerance (how safe should the investment be?), the investment horizon (when do I need the money?), the return expectation (how much return should I get?) and the expected availability of the investment (can I get the money back every day?).

Bonds are quickly available and have a comparably low risk, but the return is lowest here. Stocks, on the other hand, are riskier, but in the long term, they also offer a higher return. Just like real estate or precious metals, stocks are tangible assets. Losses in value due to rising inflation are offset, at least over time. The earning power of real estate is quite attractive. The shortcoming of this form of investment, however, is its poor availability. Selling an apartment or a building does not happen overnight. As a rule, it takes several weeks until a property is sold.

Our tip for all savers

We recommend a balanced mix of different asset classes. The longer the investment horizon, the greater the proportion of riskier investments. Investment funds also offer the option of investing in several assets at the same time. This reduces the risk of loss. With the many funds, a fund manager also pays attention to the right composition. Depending on the economic environment, the investments are adjusted.

Of course, there are always opportunities to consider sustainable investment criteria (environment, climate, social, human rights, ...). In this way, the saver can control that the money is also invested properly and that he does not profit from exploitation and environmental pollution.

Our offer to all savers

Partners of GELDPILOT24 are happy to help you find the investments that fit your individual needs. Request more information or arrange directly for a non-binding consultation.