Thrifty Germans Undecided About Saving, Investing

New statistical figures suggest many Germans are still wary about buying shares. And this despite an environment where saving money doesn't seem to make much sense because of continuously low interest rates.

Germans have the reputation of being good at saving money. On average, they put aside one in every €10 ($10.6) earned. But what they get out of it is often negligible, especially now that interest rates are at a record low, making it rather hard for savers to secure decent yields on their capital, DW reported.

The alternative would be to invest more in companies' shares, which of course involves a higher risk, but also the prospect of being rewarded properly.

But according to fresh figures from a German institute representing the interests of publicly traded companies and investors (Deutsches Aktieninstitut, DAI), only about one in seven Germans over 14 years old possessed shares or was invested in equity funds in 2016, signaling year-on-year stagnation.

Over-Cautious?

"Large parts of the population haven't yet realized the negative impact of low interest rates on their savings," DAI chief Christine Bortenlanger said in a statement.

Last year, some 4.4 million people in Germany owned corporate shares as a form of direct investment, while some 6.3 million people invested in equity funds. A total of 1.7 million people were active in both fields.

But that's far from being enough, says the latest Global Wealth Report by Allianz which comes to the conclusion that Germans "squandered away or lost some €200 billion ($212 billion) over the past four years by not buying shares or investing in equity funds.

"If you take a closer look at things, saving money boils down to parking money and has nothing to do with decent investment strategies," Allianz chief Oliver Bate concluded.

But the odds are Germans will remain rather cautious in the years to come. Many may still remember the money they lost when the new economy bubble burst at the beginning of the century. Others recall how their purchase of Deutsche Telekom shares (once billed as "the people's share") ended in disaster. And so, the "once-bitten-twice-shy" mentality lingers on.

Driving Growth

Germans prefer buying property or a new car rather than purchasing shares. The willingness to buy something has climbed to an eight-year high. "An increase in consumption also helps other countries affected by the economic crisis, as it boosts German imports of goods from other nations," researcher Burkl told DW. More exports from other countries will also reduce Germany's huge trade surplus, for which the country is regularly criticized by its trade partners.

Furthermore, higher consumption also offers increased momentum to Germany's economy. "Private consumption is central to our economic growth. And solid consumption is also a prerequisite for economic expansion and prosperity," Jan Philip Weber, economist at the National Association of German Cooperative Banks, said.

Continued Decline

Nevertheless, consumption remains a double-edged sword as demographic developments in Germany will continue to put pressure on the country's savings rate.

"The rising share of retirees in the population will increasingly have a dampening effect on German savings," Weber said, adding that his organization projects the savings rate to sink to 7% from 2020.

As an aging society leads to a decline in the level of pensions, Germans will have to put more money aside for retirement in order to avoid old-age poverty, noted Burkl. He suggested that a savings rate of 10% is needed in the country.

There is also another reason behind Germans' decreasing interest in saving. "We currently have a central bank that is running a zero interest rate policy. This means savings are hardly bearing any interest," Weber said.