Is the savings book still worth it these days?

Georges Bock
Table of contents
Georges Bock

Do you remember the first money you saved? Maybe you, like many other children, put it in your first savings book. Back then, the savings book was considered the epitome of a safe and high-interest investment - even for the youngest children. Unfortunately, over the past few years, the savings book has lost its reputation as "the" product when it comes to wealth accumulation.

If you've been following recent developments in inflation and low interest rates, you may know that the savings book is no longer bringing positive returns. Many savers are therefore looking for an alternative.  

Do you want to know why people are turning away from the savings book? In the following blog, we'll explain how the rate of return is affected by inflation and interest rates and how you can find a sustainable alternative to a savings account. Because: You don't have to give up on your financial goals. There are alternatives that even score points for sustainability.  

In a nutshell

  • You can open a savings account at the bank free of charge and without any complications. It's a regular savings account without a specific term.
  • The interest rate on a savings book is variable. Due to historically low interest rates and inflation, the yield currently hovers below 0.
  • Many of the advantages of the traditional savings account, such as high security, also apply to other forms of investments. It's possible to find good alternative to the savings book.
  • Are you looking for an alternative to the classic savings book? Possible options are, for example: call money, time deposits, real estate, bonds, shares and index funds.
  • Even as a beginner, you can build sustainable wealth, for example with funds. At Moniflo, we offer an app that helps you manage your investments and easily find new funds that match your values. You can also expand your knowledge with the help of tutorials.

What is a savings book?

The savings book, as the name suggests, is actually a kind of "book". Depending on the bank, it has a certain color, which originally symbolized the affiliation to the bank. The color red, for example, was used for the savings bank. To open a savings book, all you have to do is make an appointment at the nearest bank.

The passbook itself offers several pages on which cash receipts and withdrawals are documented. This makes transactions particularly transparent. The account balance can be checked at any time. Most people keep their savings book at home.

There is now a modern version of the classic savings book. The paperless savings account is opened together with a savings card, and allows for cash withdrawals and the printing of savings account statements. 

What are the conditions of a savings account?

Opening a savings account is as simple as can be. The same applies to account management. If you want to deposit cash on your account, you can either apply in person at the relevant bank or initiate a transfer from your checking account, for example. 

At the end of the year, the interest earns on your savings is credited to your savings account. The amount of interest is always dependent on the respective key interest rate. For this reason, current low interest rates have a significant impact on return, i.e. the yield that your savings generate in a certain period of time. 

If you want to withdraw money from your savings account, there are two main things to consider: You can only withdraw as much money as your account balance allows. And, in addition, the amount must not exceed €2,000. If you wish to withdraw larger amounts, you have to close the savings account, giving a notice period of three months.

Savings book: costs and regulations

In most cases, a savings account is free of charge. There are also no fees for deposits and withdrawals. However, if you want to withdraw a large amount from your savings account, you must pay attention to what's known as the "interest on advances". The exact conditions can be found at your bank.

Is a savings account safe?

Perhaps you, like many other savers, want to make sure your investments are secure, given current world events. The European deposit guarantee protects up to €100,000 of the money you have in savings accounts from creditors .  

This is a relevant consideration if the credit institution goes bankrupt. However, it is not a true advantage of savings accounts, because the same conditions also apply to call money and time deposit accounts. Similar schemes also apply to investment funds, but with different limits. As a result, other products also score points in comparison.  

Is the savings book still worth it these days?

For a long time, the good reputation of the savings account was undisputed. For many savers, the focus was on simple account management and high security. Many children also received a savings book. Perhaps you yourself still have a childhood memory that connects you with one.  

Many parents and grandparents used to deposit money in the book on special occasions such as birthdays. Today, many prefer to look for an alternative to a savings book for children.  

In a nutshell

To weigh up the pros and cons, it helps to look at all the different criteria affecting the account. Important benchmarks include security, flexibility and yield. 

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Costs and account management
The savings book is free of charge and easy to apply for.
Those who wish to withdraw larger amounts may be subject to interest on advances.
Up to €100,000 in your savings accounts is protected from creditors by the European deposit guarantee.
The statutory deposit insurance also applies to other forms of investment. In addition, the savings book carries a high risk of fraud because it is a bearer instrument.
You can open a savings account or deposit money at any time the bank is open.
Withdrawals from a passbook are not very flexible (maximum amount, notice period). In addition, if you have a classic savings book without a savings card, you have to keep to the bank's opening hours.
Savings account interest rates are very low, and a positive return is virtually no longer possible.
Intended use
You don't have to make an investment/use decision.
Lack of transparency! The money saved is reused by the bank in any way it wishes. What's more, you cannot determine the level of risk or the purpose of use. You can't say, for example, that you don't want the money to be used by arms producers, coal-fired power plants or other activities you consider unsustainable or harmful.

Conclusion: the savings book - a losing deal

You've probably already noticed that shopping and filling up with gas has become more expensive. In recent months, prices have risen rapidly and money is increasingly losing value. The reason for this is inflation. According to preliminary calculations by the Federal Statistical Office, inflation is currently at 7.6 percent (as of June 2022), a slightly weaker rate. In March, the rate in Germany was as high as in 1981.  

But what does this mean in concrete terms for asset accumulation? In the 1980s and 1990s, interest rates on savings books were sometimes over 2%. Unfortunately, this is no longer the case today. Due to the inflation rate and the current low interest rates, savings books currently give you very little or no interest. The real interest rate of your investment may even be negative.

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Inflation rate
Savings interest
Equity fund return
Capital development
Savings book
Fund investment

Recent history shows: If you want to save with a savings book, it is no longer lucrative, because savings book interest rates no longer cover the rise in inflation---by a long way. Nevertheless, you don't have to sstop going after your financial goals. With a suitable alternative to the classic savings book, you can still invest money profitably.

Alternative to the savings book: What options are there?

Are you feeling unsettled by inflation and the current global economic developments? Don't worry, that's how many savers feel at the moment. After all, no one wants to watch their savings shrink.  

The good news is that there are still worthwhile options with which you can invest money profitably. In the following, we would like to give you an overview of possible forms of investment and their respective advantages and disadvantages:

  • Fixed-term deposit: Savers receive interest on the deposited amount on a daily basis. You can withdraw the balance at any time and remain flexible. However, the interest rates here are also relatively low.
  • Call money: As the name suggests, you invest a certain amount over a certain period of time (at least six months and at most six years). Depending on the provider, there are different conditions, which you can compare to see which suits you best. Here, too, the return is relatively low. On the other hand, the time deposit account offers a high level of security due to the deposit guarantee. 
  • Bonds: These are so-called fixed-income securities. Investors pay money when a bond is issued and receive predefined interest payments back at the end of the term. With the bond, the investor does not assume any entrepreneurial risk, because the money must be paid back together with interest even if the company loses.
  • Shares: Shares are securities. They certify ownership interests in companies. Shareholders are owners of stock corporations. This entails voting rights at shareholders' meetings and a right to dividends. As an owner, however, the investor is also exposed to the full economic risk of the company and also participates in its full economic success. The value of shares is mostly determined on stock exchanges.      
  • Real estate: A good way to passively build income. As a rule, a higher starting capital is required. Real estate investments are hardly liquid and require a higher management effort.
  • Funds: Currently considered to be solid investments with manageable risk. Together with others, you invest in one or more assets (e.g. bonds or shares). In this way, you achieve a high level of diversification in terms of default risk and avoid total losses, as in the Wirecard case. Due to the large selection of fund types, there is something suitable for almost everyone, including sustainable opportunities. Another advantage is that you can also invest with small amounts. 

Sustainable funds as an exciting alternative to saving

There's no question that recent developments on the market are causing uncertainty. Nevertheless, you don't have to let it stop you reaching your financial goals. Fortunately, there are still lucrative ways to escape the low-interest trap. And you can even invest sustainably. 

The trend shows: More and more people want to invest with a clear conscience. Sustainable funds with ethical-ecological investment criteria, have therefore become increasingly important in recent years. The beauty is: You can invest money and at the same time commit yourself to something that is important to you. Do you also value investing consciously and being able to contribute to a better world?

Funds are currently regarded as solid investments with a manageable risk. They're one option for escaping the low-interest trap, as the returns are relatively good.

But how do you recognize sustainable funds in the first place?

You may have heard of "ESG funds" in this context. The term comes from English and is an abbreviation for the three values:

  • E - Environment
  • S - Social
  • G - Governance

All three keywords are intended to define the term sustainability more precisely. The term ESG fund offers a first clue for investors who want to invest specifically in sustainable companies. However, the lack of transparency about the impact of investments is still an important issue.  

This is because not every ESG fund actually corresponds to the values they state. So you can't necessarily be sure that a fund that calls itself ESG meets your standards and your values. Further steps are necessary.

Moniflo makes it easy for you to invest sustainably

If you don't want to spend days immersed in research and are a beginner to sustainable funds, our app Moniflo, can make it easier for you to invest sustainably in a simple way.   

Moniflo lets you base your investment choices on your personal values. With the help of certain filters, you can find suitable funds and manage them all in one place. But how does the app actually find suitable funds?

The app uses a score that gives you a complete yet simple picture of the impact of a portfolio or fund. The system of filters is based on a collaboration with Clarity AI, a provider of sustainable insights. Their Impact Score indicates whether the companies in the fund or portfolio are aligned with a specific UN Sustainable Development Goal (SDG).

To calculate the Impact Score, Clarity AI tracks and measures a set of more than 60 relevant metrics linked to 52 SDG targets.

Once you have found suitable funds, you can easily manage them in the app. You can also keep an eye on your performance at all times. You don't have to use different programs or torture yourself with Excel spreadsheets. Just use the app!  

Investing with funds also possible for beginners

Are you still a beginner in the exciting world of funds? Be brave! Moniflo has several tutorials ready for you to expand your knowledge.The clear design of the app also makes it easy for you to choose suitable funds.  

Simply invest sustainably

Open an investment account that allows you to invest in funds that match your values.

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Georges Bock is the CEO and founder of Moniflo. He sees money and investing as a way to shape the future by taking a bottom-up approach. He lives in Luxembourg with his family and his dog Yola and enjoys nothing more than watching his two children discover the world.


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