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How should expats invest in Germany?

Lucky enough to have something left over from wages each month? Would it be best to put it in property or start a pension? In this week's Job Talk we asked a financial adviser about the options in Germany.

How should expats invest in Germany?
Property or stocks? Photo: DPA/Nicole Jankowski

Sending money 'home' to a nest-egg may seem like the most logical thing to do, while putting money into a German property might be a little scary. And what about the famed German pensions? The Germans seem to love them – would it make sense to put extra cash into one of those?

Here Munich-based financial adviser Martin Brown gives us some ideas.

Property

The housing market in Germany is doing exceedingly well at the moment. We advised all of our clients to buy German property. Not all of them listened. For those who did, they're doing extremely well. For those who didn't it's probably a bit too late.

If our expatriate clients are going to stay in Germany we advise that they should really look at German property as a reverse pension programme.

We advise people to buy a rental unit – not a two-bedroom flat, or a big property or a house. You are looking for a studio apartment in a central location no more than two blocks away from a U-Bahn or S-Bahn station. There should also be cafes and amenities nearby if possible.

These are still available if you are fast enough. Look for something between 25 and 50 square metres – no more than 50.

The best cities to buy property in are Frankfurt, followed by Munich, followed by Cologne.

I wouldn't advise anybody to buy in Berlin and there are a simple set of reasons why not: It is a lovely city and it is very popular with foreign buyers. But Berlin has no fundamental underpinning. It has too much land and redevelopment possibilities which will go on for decades to come.

This means there is no shortage of apartments and new trendy areas are constantly emerging. You do not have that in small defined business cities like Frankfurt. Prices have increased in certain areas in Berlin but eventually fundamentals will catch up with you.

Never buy in order to rent to someone long-term. It is too expensive and there are too many upfront costs. Buy properties in good areas and do them up nicely and then companies want to rent these because it is cheaper than putting staff for three to six months in a hotel.

Pension schemes

Are they always appropriate to expatriate clients? No they are not. German products are very often inappropriate from a long-term savings point of view.

You only have two forms of saving programme that you are going to be able to save any taxation on – Riester-Rente and Rürup-Rente.

Riester-Rente is generally for people who are employed by a company. It was originally set up for lower income families with children and that is still the case.

If you have more than two children and you are going to be staying in the country it is worthwhile considering one, but not if you are planning to leave the country when you would be eaten up on charges.

Long-term let’s say you are going to stay in Germany, the underlying guarantees on Riester-Rente are normally just one percent a year, so you are making less than inflation so you are going to be losing money.

For self-employed people you have a different type of semi-state sponsored programmed called Rürup-Rente. You can contribute up to €20,000 a year. But you need to be very, very focused. Do not take one if say you are going to be here three to five years or if you are not going to be retiring here.

It is also quite inflexible so be careful. On both types of programmes it is preferable to stay in Germany to get the maximum out of them.

The stock market

Direct stock market participation by any individual should be undertaken only if they have a thorough knowledge of the stock or bonds they wish to buy, and how to trade effectively.

People need to be honest with themselves. They need to look at the four Ws first: What, When, Where and Why. This is particularly important for expat clients.

Customers should ask themselves: What will I need? If I'm trading in stocks and I'm trying to save for retirement, what am I going to need that money to turn into? This helps to design what sort of risk you should be looking at.

Also ask yourself: where? Am I going to stay in Germany? In which case, if you're trading stocks, you're going to be charged all sorts of taxation on your profits including a 25 percent flat tax on profits.

I would say to anyone trading stocks directly: know what you're getting into. Is it the correct risk for you to be taking?

Sending money home

If your intention is to send money home [to a non-Euro country] you need to consider exchange rates to time your transfer. You should probably use a foreign exchange trader. In general they do a very good job.

The worst thing to do if you’re going to be sending say €5,000 or €10,000 is to ask your bank to send it back to your account. You will lose quite a lot.

Martin Brown is a financial adviser at First Financial Direct Group

DISCLAIMER: The content of this article should be used for general information purposes only. It does not constitute financial advice. 

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MONEY

EXPLAINED: 10 ways to save money on your groceries in Germany

With inflation at its highest level in 70 years, consumers in Germany are really feeling the pinch, particularly in the supermarket. Here are some simple tips on how you can save money on your grocery shopping.

EXPLAINED: 10 ways to save money on your groceries in Germany

1. Buy seasonal products

Fruit and vegetables are less expensive when they are in season in Germany, as they don’t have to be kept in cold storage which – thanks to high energy prices – incurs high costs which are passed onto the customer. So going for produce that is naturally abundant at the time of year can really pay off. 

At the moment, vegetables such as kale, squashes, leaks and cabbages are currently in season, but you can refer to an online Saisonkalendar (season calendar), such as this one, to keep an eye on which fruits and veggies are in season at different times of the year.

Regional organic vegetables on sale in Brandenburg. Photo: picture alliance/dpa/dpa-Zentralbild | Bernd Settnik

2. Go easy on butter 

The price of butter in Germany has increased by over 40 percent in the last year – in some cases, a 250-gram packet of butter now costs €3. 

READ ALSO: Energy crisis: Which everyday German products are increasing the most in price?

As a substitute for butter in cooking, go for vegetable oils such as olive oil, linseed or soybean oil or certain types of margarine and, for spreadable treats, consider alternatives such as quark or cheese spreads. 

3. Have a meal plan and a shopping list

One golden rule for saving money in the supermarket – wherever you live – is to plan your meals and write down the ingredients in a list. Having a shopping list often helps avoid expensive spontaneous purchases and helps you to really only buy the things you will definitely use.

A woman writes a shopping list. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

4. Buy less meat

The prices of meat products, such as sausages and fish have also risen by 19.3 percent since last October. As a result, German consumer advocate groups advise shoppers to replace some of their meat products with plant-based foods, pulses or legumes instead, such as lentils, peas, beans, chickpeas, and soybeans.

READ ALSO: Thousands protest in Berlin over price rises

5. Visit markets

Consumer advice groups also advise shoppers in Germany to visit their local fruit and vegetable markets, as fresh produce can often go for a lot cheaper than in the supermarkets.

6. Compare prices by weight 

Another good tip for buying groceries on the cheap is to compare prices by weight, not simply by the retail price on display. In addition to the retail price, you will usually see how much 100 grams of each product costs and you should use this number as a basis for comparison.

A customer stands at the scales for fruit and vegetables in the Eisenstein village store in Bavaria. Photo: picture alliance/dpa | Armin Weigel

For example, if you want to buy Parmesan cheese and there are two different varieties marked at €4 and €6, the €4 package may seem cheaper. But if you then look at the price by weight, you may find that the €6 Parmesan comes to €1 per 100 grams, while the €4 package comes to €2 per 100 grams.

7. Use apps to find deals 

The price for the same product can sometimes vary greatly between supermarkets in Germany, so it can pay to shop around.

But, if you don’t have time to go from store to store hunting down the cheapest products, there are several apps – including Smhaggle, Marktguru and KaufDA – available which you can use to find and compare deals in local supermarkets. 

Another great app for those looking to make serious savings on their foodstuffs is Too Good to Go – an app which connects people to local restaurants, bakeries and food shops which are looking to get rid of surplus food. 

8. Get an advantage card

With an advantage card such as the Payback Card or DeutschlandCard, you can collect points every time you shop in a variety of stores, and then ultimately transform these points into monetary discounts. 

A customer uses their Payback app at the supermarket checkout. Photo: picture alliance/dpa/PAYBACK GmbH | PAYBACK GmbH

These cards are free to get and just require registration. Using them regularly, along with extra point-collecting coupons, can amount to quite a savings. 

9. Check out the bottom shelf

The bottom shelves in German supermarkets are often where you will find the most economically-priced products, including the supermarkets’ own-brand products. If you reach for the private labels “Rewe”, “Ja”, “Gut & Günstig”, “Edeka”, “Penny”, “Grandessa” or “Maribel”, you can get almost the identical product as the branded variety for half the price. 

10. Shopping just before closing time

If you shop just before closing time, you can often find great deals in German supermarkets – especially at the vegetable, fruit, meat and yoghurt counters. 

READ ALSO: KEY POINTS: Germany’s inflation relief measures to support people in cost of living crisis

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