Germany v. France : even in the field of personal savings, it's complicated

The French always compare themselves with the Germans. We've applied this to personal savings. And guess what...

Germany is the European Champion...

Germans save a considerable portion of their incomes. According to Eurostat, they save 18% of it, which puts Germany ahead of any other European country on this metric. By comparaison, that's nearly twice the European average and several percentage points higher than the 14% that the French achieve and which puts them squarely amongst the top performers. Another comparaison ? Our former fellow European citizens, the British only save 6% of their disposable income on average !

... of dormant cash

Just like the French, the German savers do not like to take risks and therefore invest very little in the stock markets. According to German bank DZ Bank only 7% of German savings are invested in the equity, and a modest additional 11% was allocated to investment funds. And in still in line with the French habits, given that most term deposits yield very little, they leave increasingly large sums of money on their zero-interest earning current accounts.

Last year alone, deposits on current accounts increased by 8.5% to reach a total volume of 1.8 trillion euros. Yes that's right, 1.8 TRILLION euros are not earning anything. At Cashbee, that gives us the chills!

As a reminder, in France the volume of deposits that sit on current accounts is approximately 400 billion euros, to which we can add a further 200 billion euros sitting on classic savings account (typically earning a meagre 0.10%). Whichever way you cut the numbers, the amount of money sitting on dormant accounts in Germany largely surpasses that in France, which is already an impressive volume.

Advantage to the French with regard to available options

Beyond the absolute amounts, key differences do exist between the German savings and those "à la française". Indeed, the French benefit from two flagship savings products, unavailable elsewhere, which are the Livret A and the assurance vie en euros. Both are highly liquid, capital guaranteed and offer fiscal advantages. They also both offer a positive return, albeit a very small one. The interest rate on the Livret A has recently been adjusted to its historic low of 0.5% and the average yield on on the contrat euro is nearing 1.20%. Nonetheless, neither product is available to our neighbours north of the Rhine.

They therefore have little choice but to let their cash garner dust (but not much more) on their non-remunerated current accounts, or even worse, to be charged a modest interest rate by their bank for the pleasure of having deposited their cash in its coffers. Yes, you read that right : savings can yield less than zero.

Could French deposits be charged as well ?

The concept of negative interest rates is a direct consequence of the European Central Bank's monetary policies, ailed at stimulating the broader European economy by lowering its interest rates, which in theory should make it easier and cheaper for companies to borrow, thus fuelling investment and economic growth.

And this policy does not only have negative consequences. But it is fair to say that it has pushed certain German banks to transfer the negative interest rate which the ECB applies to its excess retail deposits to some of their private clients, most notably those that have deposited important sums of money on their current accounts.

In France, even though a handful of private banks are thinking about similar practices, we do not believe that the large retail banks are about to start charging the deposits of their retail clients (for now). The introduction of such a charge on deposits would likely have a major impact on the French society and entail massive debates in the public opinion, which the large banks do not seek.

This does not take away from the fact that the number of savings solutions which are safe, liquid and offer positive yield are diminishing rapidly, which undoubtedly constitutes a contributing factor in the fast growing number of savers that have turned to Cashbee since the start of the year.

Marc Tempelman

Co-fondateur de Cashbee

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