Not only on the traditional World Savings Day do many young, saving-happy families think about the right investment. Because “classic” (and particularly safe) forms of investment such as the savings book unfortunately hardly ever yield any interest. Thanks to inflation, in the medium term there is even more of a loss of money than a profit. In addition, more and more banks are charging negative interest on current accounts or increasing account management fees.
So what do you do as a brave saver if you don’t necessarily want to go public with your money in order to build up a fortune with securities in the medium to long term?
Not that easy, we agree. But that’s exactly why the topic has not left us in peace. That is why we have determined for you with detective instinct which sensible alternatives to the good old savings account could still exist today – and are in no way inferior to them in terms of “security”. In our guide to the “modern savings account” we answer the following questions:
- What else is there to consider before saving?
- What advantage did the savings account offer in the past?
- and what modern and secure alternatives to savings accounts are there today?
Save money properly: You should pay attention to this in advance
Whether for the next trip on vacation, a new (big) purchase or wealth accumulation and retirement provision: there are all kinds of good reasons for saving. Also in terms of your own children, of course. Because studies or training want to be financed securely after school. So putting something aside is always a good idea, for parents and young singles alike!
In order for the savings to really work, a few small things should be considered. It is therefore important for you to at least avoid the typical pitfalls. That’s why we now have some really sensible savings tips ready – which are better than keeping a household book.
Correct saving tip #1: Not at the expense of an expensive overdraft facility
If you overdraw your checking account, you usually pay a high penalty interest. The so-called overdraft facility costs an average of almost ten percent. That means: If your account is in the red, you always pay dearly for this red number.
You should therefore not use the credit line that has been granted – and above all not save at its expense. Since the negative interest on the overdrawn amount is not insignificant, it is usually higher than the savings interest. And this is completely independent of the form in which you invest or manage your money. So you should only save if you remain positive on your checking account or if you don’t have to repay any other (expensive) loans.
What you should also note: Many banks charge account management fees so that you are “allowed” to keep your money in the current account. You can save yourself the financial expense in the truest sense of the word. There are also numerous banks that waive this fee that is of little use. So it is best to switch directly to a cheap or free bank. Your credit will also be kept safe there.
Correct saving tip #2: Risk protection comes first
Wealth accumulation is good, but hedging risk – at least elementary – is even better. After all, what good is a bulging savings account if, for example, you forgo the monthly premiums for your private liability insurance?
Exactly: When in doubt, nothing at all. After all, damage to property or personal injury caused by you can quickly run into the hundreds of thousands (or even millions). In such a worst-case scenario, no amount of savings in the world can often cover it. Even existential risks such as occupational disability should be covered in advance. If the private risk protection is in place, you can then start saving at full speed!
Correct saving tip #3: Only save where it doesn’t bother you
However, if you only start saving when you (feel) have enough money for it, you usually wait forever. You rarely have enough money – and many expenses are just too tempting. But if you have a lot of unused subscriptions to deal with, you should urgently put them to the test. And all of them. In example: You have two subscriptions for streaming services, but only use both rarely, you should at least say goodbye to one provider. And let’s be honest: You don’t necessarily need the expensive contract for the gym if you only do sports three times a year. It is better to invest the released reserves in your savings rate. The only question that remains is: Which form of investment is most suitable for you?
What great advantages did the savings account once offer?
Whole generations benefited from the classic savings book advantages in the 80s and 90s, that’s clear. That’s why most of us got one when we were born. But today that is unfortunately passé. In order to find a healthy alternative, we first have to see what advantages the savings account offered in principle:
- In the 80s and 90s there were sometimes more than 2% interest on savings accounts.
- Not only you, but also parents, grandparents and other relatives could pay into the savings account at any time. You only had to go to a bank counter and the amount grew.
- The savings book was flexible: As a customer, you could access the savings amount at any time.
- The savings book was safe and not subject to fluctuations in the capital markets.
- and; the savings book usually worked without small print or much effort. There were no pitfalls, there was no need for a reference account. So anyone could open it. So it was an all-around simple affair.
Certainly, some of the advantages still apply today: The top savings product of the past, however, can no longer shine with its interest rates. So it is definitely no longer suitable for making money. The best savings accounts only bear interest of around 0.05 percent when they are closed today. Unfortunately, the inflation rate is around 1.8 percent. A clear drop in value from day to day.
Fixed-term or overnight accounts and securities as safe alternatives to savings accounts?
In order to get closer to the epitome of saving, we compared the classic savings account with a time deposit, an overnight account and a share savings plan. Our goal: to find a simple form of investment that is flexible and secure and still yields around two percent interest. So what is a good and safe alternative – and is there such a thing as the “one”?
The call money account
The money market account is also no longer known for its returns. Nevertheless, it at least brings higher interest rates. After all, up to 0.5 percent with leading providers. That’s not much, but savers are still happy – because at least that’s a lot more than with a savings account. Although this cannot keep up with inflation either, it at least limits the losses.
The fixed-term deposit account
Fixed-term deposits only seem good if you can do without the money you have saved for a clearly defined period of time. In addition, you can no longer increase the amount invested or make additional payments for the family.
Shares and securities
Securities are usually high-yield in the medium to long term. As an investment, however, the capital markets are not necessarily suitable for beginners. In addition, a securities account must first be opened. There are latent risks here, because the capital markets are subject to fluctuations. So it’s not as secure as a savings book or call money account. In return, the prospects for returns are also significantly better. Experts estimate the average increase in value at around six percent per year.
For savers, ETF or fund savings plans are particularly suitable, to which we dedicated an advice article some time ago. With equity funds, you regularly pay a fixed amount into your custody account. Once automated, such a savings plan is a simple investment – and ideally brings good interest. If you choose broadly diversified funds, you also reduce the individual risk that individual stocks in particular would bring. A longer-term savings plan should therefore definitely be considered as an alternative to a savings account.
Although there is no absolute security in the investment here, there are opportunities for a better interest rate. In addition, the savings plan can be varied and the amount saved can be paid out at any time. So there is also flexibility. Even the family can participate with a free amount.
What is the best savings account alternative for me?
Not easy. Unfortunately, there is currently no “jack of all trades” when it comes to saving properly. Either the interest rate is too low or the flexibility is too weak. From our point of view, the best alternative is a combination of the call money account and a fund savings plan – ideally half each. Why it is like that:
- If you use a separate call money account for half of your savings, this protects you from impulse purchases in any case. Also, when it comes to saving, it’s sometimes “out of sight, out of mind.” This has helped a lot here despite the low interest rate. On the other hand, the interest income on the savings account is still better than on the checking account or savings book.
- On the other hand, you invest the second half of the amount to be saved in your portfolio. Thanks to your savings plan, you can benefit from above-average interest rates when investing, which is usually good for your savings.
The advantage of our 50/50 solution is therefore obvious: you use the absolute security of the call money account, and on the other hand you benefit with the other half from the increase in value on the capital markets. This means an average increase in value of around three percent per year for you across both forms of investment – and still brings you (almost) the security of overnight money. Sounds pretty good, doesn’t it?
And one last tip: It is best to put your money in your savings account and custody account at the beginning of the month. If you wait until the end of the month, there may be nothing left of the salary – the temptation is often too great. And that would be stupid. A transfer with a standing order at the beginning of the month is therefore always a good idea to constantly increase your savings.