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BANKING

How to grow your savings in Germany during high inflation

With savers hammered by high inflation, banks in Germany are offering unorthodox options to make your money last longer. So what's the best way to stop your savings getting consumed by the rising cost of living?

A piggy bank
A German piggy bank with euro notes. Photo: picture alliance/dpa/dpa-Zentralbild | Patrick Pleul

The last few years in Germany have been pretty tough financially for most people. People lost work during the Covid-19 pandemic, and then were hammered with the rising cost of living and energy prices caused by Russia’s invasion of Ukraine.

The once-solid property market has collapsed, and stock prices of even huge companies like Siemens Energy can be very volatile. Meanwhile, inflation current stands at 4.5 percent, so €100 will only be worth €95.5 in a year’s time if that rate holds.

All in all, it’s hard to know what to do with your money – that’s if you’re lucky enough to have any money left.

READ ALSO: Germany sees record drop in property prices 

An interesting and novel way around this is fixed deposits or “Festgeldzinsen”, according to analysis by consumer comparison portal Verivox. Inflation and interest are both so high that borrowers are desperate for money, and you can provide some for one year, even in relatively small amounts.

“The return of positive real interest rates is an important turning point for savers,” said Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH.

This is being called a “Wende” or turnaround in investment.

READ ALSO: German Word of the Day: Die Wende

For the first time in decades Germany has interest rates higher than inflation, with some providers paying as much as 4.75 percent interest. With inflation at 4.5 percent in September and likely to fall, that’s effectively money for nothing.

For these high rates, you are best off looking at yearly fixed deposits at banks in other countries in Europe.

But there is a catch: your deposit is only legally protected after €100,000.

Piggy bank in Saarland

A piggy bank in Saarbrücken, Saarland. Photo: picture alliance/dpa/CosmosDirekt | AdobeStock_108314803

On the other hand, fixed deposits in German banks, where your deposit is always legally protected, aren’t currently worth your time or money. The real interest rate – the value after inflation – is sadly in the red, losing 1.18 percent annually.

Short term “daily” deposits which can be withdrawn at any time are not worth it at all, with much lower rates.

What about current accounts?

Even if you aren’t a savvy investor, almost everyone in Germany will have a current account. You might be looking at inflation eating away at your savings with worry. The good news is that some German banks have increased interest for current accounts too.

The highest for a current account is C24, the in-house bank of consumer portal Check24, which offers 4 percent.

If you prefer a more established credit institution, Santander has an impressive 3.7 rate for new customers, and ING and Deutsche Kreditbank have raised their interest rates from 1 to 3.5 percent until January.

This of course isn’t coming from the goodness of banks’ famously big hearts. Handelsblatt reports that there is competition returning to the sector as the deposit holdings of savings and cooperative banks fell in the first half of 2023 for the first time since the 2008 financial crisis.

Has inflation peaked?

Leading figures from the European Central Bank (ECB) met earlier this week in Greece to discuss policies. While there, Central Bank President Yannis Stournaras proudly mentioned that Greece’s economy is growing faster than Germany’s.

Due in part to aggressively high interest rates, inflation rate has been falling across Europe and now stands at 4.3 percent on average. But that’s still twice as high as the ECB want it to be.

READ ALSO: Why 2023 will be a better year to grow your savings in Germany

What about investment in general?

If you are thinking long term instead of just getting through this crisis, then experts at Nico Hüsch advise that broadly diversified equity funds – spread-betting with your money – are still the best investment in any portfolio that you invest in for the long term.

That means over 12 to 15 years. However, investments do always contain an element of risk. 

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MONEY

How German ministers want to protect online ticket purchases

Once a year, consumer rights ministers from Germany's federal and state governments gather for a joint conference. This year, improving online ticket sales and better data protection measures are on the agenda.

How German ministers want to protect online ticket purchases

North Rhine-Westphalia’s consumer protection minister Silke Gorißen (CDU) will present proposals for further consumer protections for online ticket sales at the consumer ministers conference (VMK) on Thursday and Friday. 

Gorißen is pushing to make online ticket sales more transparent and give consumers more rights to back out of purchases if they don’t have enough information. 

Under the proposals, consumers would receive more information before purchasing tickets, such as details on the number of tickets sold by each provider and the prices for different seat categories.

Currently, ticket prices are often only visible during the purchasing process. 

The ministers will also consider whether consumers should be granted a right of withdrawal when buying tickets online. 

READ ALSO: How Germany is making it easier for consumers to cancel contracts

“The process of buying tickets is becoming increasingly complex and confusing, often limited to very narrow time windows,” Gorißen told DPA ahead of the conference. “I expect providers to act more in the interest of consumers. The market power of large ticket portals should not result in unclear and non-transparent sales.”

More data protection online

According to DPA, Gorißen also wants users of telecomms services to be better protected when it comes to their personal data. 

NRW’s consumer minister believes providers of emails, chats, or telecommunications services should be required to put measures in place to detect malware that’s designed to steal personal information from users. This should be done at the EU level, Gorißen said. 

Moreover, Gorißen says there should be more information on online safety made available through a consumer hotline. 

“IT security responsibility should not solely depend on the digital competence of users,” the CDU culture minister explained. “Protection against cyberattacks must become a societal responsibility.”

READ ALSO: The German mobile companies with the best – and worst – coverage

The proposals are set to be voted on by consumer ministers on Friday. 

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