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WEALTH

Germans save a lot, but save badly

Germany has prided itself on its ability to weather the global financial crisis, but a report reveals Germans trail other Europeans in investing for the future thanks to poor decision making.

Germans save a lot, but save badly
Germans still save in banks despite low interest rates. Photo: DPA

The Global Wealth Report released on Tuesday by insurance group Allianz shows that while Germany has been one of the few countries where people have worked harder to save money throughout the financial crisis, Germans lag behind others in accumulating more assets and investing long-term.

Gross financial assets in Germany grew by four percent last year – slower than the western European average of five percent, despite Germany being labelled "Europe's savings champion".

"Wealth development in Germany is truly mediocre in the truest sense of the word,” said Allianz chief economist Michael Heise. "At the same time, the Germans are above-average savers.

"But it is also the case that almost nobody invests quite as much money with banks as the Germans do, even though bank interest rates are far lower than in the rest of Europe." 

In part due to their penchant for stowing all their money away in a low interest savings accounts, Germans have taken some of the biggest losses compared to the rest of Europe during the financial crisis. 

The report shows that Germans have lost €23 billion, or about €280 per capita, in what the report defines as interest rate losses – the balance of interest lost through deposits and interest burdens reduced in lending.

"German savers would appear to be stuck in crisis mode and shying away from making investment decisions," said Heise."But the ‘wait-and-see’ policy is tantamount to giving money away. Six years after the collapse of Lehman, it's high time to start thinking about the long term and investing again."

The European Central Bank has kept interest rates low during the economic crisis, reducing the amount people earn on their deposits.

While the ECB’s policy has given a boost to households in more distressed nations, it has in turn hurt German households and hit spending power.

Interest rates have been close to zero, while inflation peaked at three percent in 2008 and has since come down.

"It is not surprising that monetary policy has had this effect,” said Heise. "The strain that has been taken off debtors in southern Europe, in particular, is very much in keeping with what was intended. But it is important not to lose sight of the side effects of the policy, especially for German investors and their retirement savings."

Equality equal

The report also found that wealth distribution in Germany has changed very little since 2000, making Germany a country with a relatively uneven wealth distribution compared to others.

This is likely “one of the relics of the country’s long division into East and West more than anything else,” the report explained.

A study in February by The German Institute for Economic Research and the centre-left Hans-Böckler Foundation, found people in West Germany were more than twice as rich as those in the East, making Germany is one of the most unequal countries in the Eurozone.

SEE ALSO: Where should expats invest in Germany?

By Emma Anderson

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WEALTH

Germany takes third spot in global ranking of ‘ultra-rich’ people

Germany has snagged third place in a ranking showing the ultra rich of the world, while the number of millionaires has also gone up despite the pandemic.

Germany takes third spot in global ranking of ‘ultra-rich’ people
The number of rich is growing despite the pandemic. Photo: picture alliance / dpa | Jens Kalaene

The year 2020 caused financial stress for many people across the world. But some people – including in Germany – actually got richer. 

Overall across the world, the number of individuals with a financial wealth of over 100 million US dollars (€82.25 million) grew by 6,000 during the coronavirus pandemic year 2020, according to the Global Wealth 2021 report by the Boston Consulting Group (BCG).

Currently a record 60,000 people belong to the ultra-rich club. These individuals own 15 percent of the world’s investable assets, according to the report.

Germany came in at third place on global rankings, with around 2,900 of these “ultra-high net worth individuals,”.  The US is at the top with about 20,600 people with a wealth of over 100 million dollars, followed by China with 7,800.

READ ALSO: Who belongs to the top 10 percent of earners in Germany?

What about private wealth?

People around the globe accumulated more wealth than ever before in the coronavirus crisis year 2020.

Private financial assets rose by eight percent year-on-year to a record 250 trillion US dollars (around €205 trillion), according to the analysis.

Rising stock market prices and growing savings contributed to this. For the first time, BCG also took into account tangible assets such as real estate or gold. Total wealth thus amounted to 431 trillion dollars.

In Germany, private financial assets, including cash, account balances, shares, pensions and life insurance policies, rose by around six percent to approximately nine trillion dollars, according to the data. Tangible assets increased by five percent to 13 trillion dollars.

“Germans traditionally invest in real estate,” said BCG partner and report author Anna Zakrewski.  This is clearly shown by the real asset ratio of just under 60 percent, she said.

“At the same time, investors in Germany are saving at an above-average rate.”

Many people have been holding on to their money during the crisis, Zakrewski said, adding that temporary closures in the retail sector and travel restrictions were also putting the brakes on spending.

READ ALSO: How and why Germany’s super-rich list is growing

The number of dollar millionaires in Germany increased by 35,000 to 542,000 in 2020, according to the report. 

The consulting firm said the increase could partly be attributed to the development of the euro exchange rate, which rose against the dollar. This had a noticeable effect on the conversion to the US currency.

Across the globe, 26.6 million people own financial assets of one million dollars or more – up by 1.8 million from the previous pre-Covid year.

The US led the global wealth ranking overall with 136 trillion dollars, followed by Asia excluding Japan (111.9 trillion) and Western Europe (103 trillion). In view of the expected economic recovery after the crisis, BCG believes global private wealth will grow steadily in the coming years.

READ ALSO: This is how many millionaires live in Germany

Who are the richest people in Germany?

As heirs to Aldi Süd, they became billionaires: Beate Heister and Karl Albrecht Junior are currently the richest people in Germany, with assets of 39.2 billion US dollars, according to Forbes.

In second place of the richest Germans is Dieter Schwarz, owner of the Schwarz Group, which Lidl and Kaufland belong ($36.9 billion) to. Theo Albrecht, the co-owner of Aldi Nord, is also in the top seven, with assets of $18.8 billion.

Internationally, however, another (super) market founder is leading: with 177 billion US dollars, Amazon founder Jeff Bezos is currently considered the wealthiest person in the world.

Graph translated by Statista for The Local Germany
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