Why are savings accounts bad
Is the savings book still worth it?
Table of Contents
- What exactly is a savings account?
- What are the advantages of the savings account?
- What are the disadvantages of a savings account?
- For whom is the savings book worthwhile?
- How safe is a savings account?
- What alternatives are there to the savings book?
- The savings book is a discontinued model
Investing money is a difficult subject. It is extremely difficult to find an attractive form of investment, especially in times of low interest rates. The savings book is still popular in Germany. Almost half of Germans still have at least one savings account. No other investment product is as widespread in this country as the savings account. But in principle, new deals either bring very little interest or no interest at all. In the rarest of cases, the system is still worthwhile under this sign (status: 07/2017). So should you even think about a savings account?
What exactly is a savings account?
The younger generation in particular often no longer knows what a savings account is. This is also due to the fact that savings accounts are rarely advertised by banks these days. From a classic point of view, the savings account is in fact a 'book'. If you open a traditional savings account, go to your bank and have a book handed over to you. This is made out in your name and offers numerous pages for documenting incoming payments and withdrawals. In the classic savings book, you can always see the exact account balance and all transactions. In addition, you can keep the book at home and have your finances always in view, so to speak (as of 07/2017).
What does the classic savings account look like?
You can usually recognize the classic savings book relatively easily by the inscription Sparbuch. Depending on the bank, the savings book is usually either blue or red. There are also historical reasons for this, because savings accounts were originally mainly issued by savings banks (red) and Volksbanken (blue). In addition to this color scheme, you can now also find savings books in other colors or even with special motifs. Nowadays, savings books in particular for children often come with a special graphic or a colorful design (as of 07/2017).
How can I add money to my savings account?
Deposits can either be made by the owner of the savings account or by third parties - such as parents for their children. With the classic savings book, there is one crucial restriction: A deposit is only possible in bank branches. Depending on where you open the savings book, only a regionally limited number of branches may be able to post your deposit to the savings book. In addition, you are bound by the opening times and cannot freely choose when you want to deposit your money. In some cases, however, you can also transfer money to the savings account, for example via online banking.
How can I withdraw money from my savings account?
Withdrawals from a savings account can only be made on presentation of an identity document. Specifically, this means that only the owner of a savings account can withdraw money from it. Parents are an exception. Depending on the contract, you can not only deposit money, but also have withdrawals. This rule is often used, especially with minors. The deposit of a password is optional (sometimes also mandatory). You can only withdraw money from the savings book if you know your password and present your identity document at the same time. In general, a decisive distinction applies to withdrawals from the savings account as well as to deposits: Withdrawals are only ever possible at the counter of branches of your bank or your banking group (as of: 07/2017).
How has the savings account changed in the meantime?
The savings book as such is now only available from a few banks. The product itself lives on, but it is rarely issued as a classic book. Instead, when you open a savings account, you usually receive a so-called Sparcard (also known as a savings card), for example from Deutsche Bank, Postbank, Commerzbank and Norisbank (as of 07/2017). This card usually offers three key advantages:
When comparing the size of a savings account with a small plastic card, the latter is much more practical. In principle, you can always take your Sparcard with you and keep it in your wallet. This also guarantees additional security. In addition, a Sparcard offers you the decisive advantage of easier administration. This is due to the fact that you can even use the plastic card to make deposits and withdrawals directly at the ATM. This not only saves time, but also allows you to access your savings account outside of business hours. However, you should bear in mind that you can only use the Sparcard at the ATMs of your bank or the banking association.
Last but not least, the Sparcard has also established itself in recent years through an incentive system (as of: 07/2017): the banks have offered a higher interest rate than traditional savings books. In the meantime, however, this advantage has mostly been eliminated. You rarely get more interest with a Sparcard than with a classic savings book. This is also a consequence of the fact that there is generally hardly any interest on a savings account. So, even in the low-interest environment, you benefit no more from a Sparcard than from a traditional savings book. The higher practicability and the easier administration are nevertheless strong arguments for the modern interpretation of the savings book (status: 07/2017).
What are the advantages of the savings account?
The savings book offers a good and comparatively simple way of investing money. For example, it can also be opened for children without any problems, which makes it much easier for other people to set up a savings system. In addition, opening a savings account is usually very easy. You can open a savings account at almost all banks in Germany. The opening itself is usually done within a very short time, as no Schufa information is required before the opening. The small print is also limited in a classic savings product such as the savings book. So you don't have to deal with a lot of paperwork when opening, but can open the account really easily and quickly.
Another advantage of the savings account is that you usually do not need a reference account to open it. A reference account is, for example, a current account. You can open a savings book with a bank even if you do not have an account with the respective bank. In general, you do not need a current account to open a savings account. In addition, deposits and withdrawals are much more anonymous, as all deposits and withdrawals can be made in cash. In addition, there is only internal storage at the bank. Today's online banking is rare for savings accounts. As a result, the information is managed much more anonymously (as of 07/2017).
What are the disadvantages of a savings account?
A savings book is problematic nowadays because you cannot benefit from high interest rates with such an account. As with many other savings products, interest rates have fallen dramatically in recent years. Most banks no longer receive any interest at all for opening a new savings account. Otherwise, you will sometimes be offered micro-interest rates of 0.01 to 0.1 percent. Only offers for children's savings books are sometimes somewhat attractive. Unfortunately, the interest rates on a savings account are never really high these days. As interesting as a savings account is due to its simplicity of opening, it is not suitable for increasing money at the same time (status: 07/2017).
In addition, a savings account is quite inflexible. You cannot use the account for transfers or other transactions. In principle, you can only withdraw or deposit money from a savings account. This in turn is only possible in cash. In addition, some transactions can only be carried out at the bank counter (classic savings book) or at an ATM (Sparcard) at your bank. This makes depositing money into your savings book very complicated and much more difficult than, for example, with a call money account.
Another disadvantage of the savings book is the amount of the maximum payout. You can withdraw a maximum of EUR 2,000 per month from your savings account. So if you need more money spontaneously, you can only get it by giving notice. In this case, too, the payment will not be made by return of post. With other savings products such as overnight money, on the other hand, you can flexibly withdraw as much money as you want. This brings you an advantage that cannot be neglected, especially in the case of short-term financial bottlenecks.
Who else is the savings book worthwhile for?
The savings account is undoubtedly not a modern financial product and has been losing market share for years. The number of new degrees is very limited. Therefore, of course, the question arises, for whom a savings account is still worthwhile. In principle there are three answers to this question:
Basically, the savings account is still very popular if you want to save money for children. This is also because the children can have something in hand with a savings account. The savings account remains the most popular investment vehicle, especially for investments made by grandparents for children. This is also due to the fact that the children usually access the account at the age of 16 to 18 and can then manage it with complete flexibility.
The savings book also plays a role for two other types of investment. On the one hand, there is the savings for retirement. Older consumers in particular have often had a savings account for years or even decades in order to top up their own pension or to have a reserve for larger purchases. Savings investments for a purchase are also still popular. You can already see that it is mostly about savings investments that should not be available for several years or decades. Rather, money should be set aside for a purchase. A savings book is of course also suitable for this purpose if the interest rates are not particularly high. After all, the savings account is a really safe way to save money.
One should also not completely ignore the fact that some old contracts still come with attractive interest rates. Admittedly, taking out a new savings account is of little use these days. However, if you opted for a savings account many years or decades ago, there may still be attractive interest rates on your contract. Unfortunately, however, the interest rates have been adjusted for most of the contracts.
In the following video from the state show Baden-Württemberg from SWR, the development of the savings book is explained in a humorous way and of course with the corresponding dialect:
How safe is a savings account?
Finally, we would like to explain to you whether the savings book is a safe investment. In principle, you can assume that you will not have any problems with your savings account in terms of security. The savings book is, like the overnight money account, a very secure type of investment. You have no risk of losing your investment and are guaranteed to receive your money back in the appropriate amount. You are also guaranteed to receive interest that has already been paid out.
The only risk of a savings account would be a possible bankruptcy of the respective financial institution. In Germany, however, such provision is made within the framework of the deposit insurance. If your bank becomes insolvent, your savings deposits are protected by the state deposit insurance fund up to an amount of 100,000 euros. In some cases, private and cooperative banks - such as the savings banks or the Volks- und Raiffeisenbanken - also offer an extended security fund, which also protects deposits above this amount.
What alternatives are there to the savings book?
If you are no longer convinced by the savings account after weighing the advantages and disadvantages, there are now a number of alternatives available to you. We just want to introduce you to completely safe forms of investment, i.e. no stocks or bonds. There are also some interesting alternatives with better conditions for you in the area of savings investments:
In principle, a savings account is comparable to a savings account, but it can usually also be managed in online banking without any problems. A savings account usually has a clear purpose, which in turn can come with certain restrictions. For example, the building society account is known.
If you are looking for a flexible and non-earmarked investment, we generally recommend either the fixed-term deposit or the overnight deposit. Both types of systems have advantages and disadvantages. The fixed-term deposit is generally recommended if you are planning a long-term investment and do not need daily access to the money. In our fixed-term deposit comparison, you have the option of choosing your system with a different term. You can usually choose between terms of 6 months to 10 years. Usually, the longer you invest the money, the higher the interest. So if you are sure that you can invest your money over a long period of time, the time deposit is usually the best solution.
If flexibility and daily access to your money are important to you, the overnight money account is the right choice for you. Take a look at our daily money comparison to get an idea of the different offers. In principle, a call money account offers you the same flexibility with regard to deposits and withdrawals as a savings book. However, you can easily manage a call money account online and of course at any time of the day. Another advantage of the overnight money account is that you usually get higher interest rates compared to a savings book.
The savings book is a discontinued model
In the past, the savings account was something like the epitome of saving. But the low flexibility and the now no longer available or at least very low interest rates make the savings account a kind of obsolete model of savings opportunities. With a fixed-term deposit or overnight deposit account, you are now almost always better off. More flexibility and higher interest rates speak for themselves. It is best to take a look at our overnight deposit comparison or our fixed-term deposit comparison and see for yourself.
Passbook: ID 40916638 © April909 | Dreamstime.com
Piggy bank: Tomasz Tulik | Dreamstime Stock Photos
Family in the bank: Arne9001 | Dreamstime.com
Advice with a card: db.com
Stacking Money: Evgenyatamanenko | Dreamstime.com
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