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Saving – an outdated model or more in vogue than ever?
On the surface, you might think that saving is a relic from a bygone era, a kind of extinct custom from the last millennium. The fact is, however, that the savings rate of private households (by definition: gross savings divided by gross income, the latter adjusted for the change in pension entitlements) has been reasonably stable in the eurozone since 2000 and stood at 14.0% in the third quarter of 2023. In the last 10 years, the average values were between 13% and 14%, interrupted by the coronavirus-related upward spike in 2020 (see chart).
What is particularly interesting here is the fact that the younger generations have also understood how important saving is for the rest of their lives. According to a study commissioned by the Swedish payment service provider Klarna, over 90% of today’s 18-25 year olds in Germany put money aside, and almost two thirds do so regularly.
However, three things have changed compared to the last millennium:
- The objective of why people are saving
- The way in which advice is given
- The investment products
These changes are based on the different characteristics of younger savers. While Generation X (i.e. those born between around 1960 and 1980) still clearly believed that hard work (whether physical or in the form of long working weeks) would pay off financially in old age, the numerous crises of this millennium have led to a fundamental change in awareness and a rethink.
Generation Y (also known as millennials, i.e. those born between 1980 and 1995) is the first generation of “digital natives”, tech-savvy and above all internet-savvy, and therefore open to new forms of investment. Gen Z (people born between 1995 and 2010), the so-called “digital natives 2.0”, go one step further. This generation focuses on social issues, is concerned with sustainable investments and values a healthy lifestyle. Individuality, diversity, tolerance and openness to the world are highly valued. What both generations Y and Z have in common is their frequent use of smartphones and tablets, as well as their sometimes extremely active membership of social networks.
For the banking sector, this pronounced affinity for technology is increasingly becoming a ghost that has been summoned, but has long since disappeared. While Generation X customers visited their bank advisor on a regular basis, Gen Z now does their business from the comfort of their couch, at the quarry pond or in a café. Cash? Nobody needs it, they pay by card, cell phone or watch. But anyone who thinks that “young people” are well informed and therefore highly risk-averse is mistaken. The fact is that the good old savings deposit, in whatever form, is still the most popular way to invest money today, as a recent survey by the market research institute forsa showed. And home loan and savings contracts also continue to enjoy lively interest as a traditional form of savings, especially after the significant rise in interest rates on loans in 2022 and 2023.
But even if the dead live longer, modern forms of investment are clearly on the rise. At the forefront here are investment funds (shares, bonds, real estate), followed by ETFs, both forms of securities are simple and usually easy to trade, partly meet the demand for sustainable investments and will probably continue to grow in percentage terms. The interest of Generations Y and Z in digital currencies such as Bitcoin is certainly not surprising, but in percentage terms these highly speculative variants still hardly play a role in financial investments.
The forsa survey also found that 90% of young adults consider the topic of investing to be very important, while at the same time only around 20% of respondents rated their knowledge of the subject as good or very good. Apparently, although the internet theoretically offers everything, it does not always provide the desired information and, above all, not in a complete and comprehensible way. Influencers, YouTube performers and various social media channels have become information pools due to their high frequency and 24/7 availability, but at the end of the day, much remains superficial.
However, all the offers available on the market make it clear how important saving is in terms of standard of living, retirement provision and the ability to fulfill wishes.
Whether classic savings plans, fund savings, ETF savings plans, etc. — long-term asset accumulation is and remains essential for financial independence and should always be started as early as possible.
Example calculation::
- Monthly savings installment: 250 euros
- Term: 30 years
- Expected return p.a: 5%
- Savings at the end: 90,000 euros
- Investment result: approx. 200,000 euros
Our savings plan calculator
Simply calculate your investment result now with our savings plan calculator:
Amount you would like to pay in once at the start.
Amount you can pay in each month.
Percentage increase in monthly payments per year in percent.
Planned period in years for the term of the savings plan.
Estimated average annual return in percent.
Your final assets are likely to be this high: €*
*The calculated value is based on assumed average values, which were projected into the future. The actual return can and will generally differ.
The amount of a savings installment is correctly calculated if it can be paid every month without any problems. Irrespective of this, any savings plan variant should be flexible in all directions and adaptable to your current life situation.
If we can help you with your financial planning, if you are looking for ideas on how best to invest your money or if you have any other questions, please feel free to contact us at any time. We are available to you by phone, e-mail, digitally via video conference and, of course, in person!
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