Saving
When saving, you set aside funds you do not currently need in order to be able to access them later. The money is not kept at home — that would be hoarding — but remains in the national economic cycle.
You can save for different purposes, for example to have an emergency fund, to make a specific purchase, to finance an education, or to have reserves for retirement.
Savings deposits at a credit institution
With this type of saving, the money is made available to a credit institution. In return, you receive interest. A savings deposit can therefore also be described as a loan to the credit institution. It is open-ended and is not intended for day-to-day payments. You can choose from different forms of saving.
Saving with a passbook
A common form of saving is the passbook. The amount of the savings deposit, the depositor’s deposits and withdrawals, and the interest paid by the credit institution are recorded in this document. The savings account begins with the depositor’s first payment. The passbook is issued at that time. The depositor can decide the timing and amount of further deposits freely. Interest rates are usually variable. They are oriented to the average savings interest rate.
The average savings interest rate refers to the average rate paid for savings deposits that have a three-month notice period. Interest is credited at the end of a calendar year or when the account is closed. Amounts up to a certain limit can be withdrawn without notice each month. The notice period for withdrawals above that limit is three months.
For withdrawals, the passbook must be presented. There are only a few exceptions. Presentation may be waived if money is transferred by standing order to another savings account of the same depositor at the same credit institution. It may also be waived if payments from the savings account go directly to the account-holding credit institution (e.g. for loan repayments or securities purchases), or if the depositor is prevented from presenting it and amounts are transferred to them.
If the passbook is lost, a public notice procedure is carried out. A public announcement of the loss is made. After that, the depositor has three months to assert their claims. In this case the savings balance is paid out to them without presentation of the passbook. After the expiry of this three-month exclusion period, the passbook is declared invalid by the credit institution where it was kept.
According to § 808 Abs. 1 Satz 1 BGB, the passbook is a qualified legitimization document, meaning the credit institution is entitled to pay money to anyone holding the passbook. According to § 808 Abs. 1 Satz 2 BGB, the passbook is also a defective bearer instrument. This means that the current holder can demand payment, but the credit institution is entitled to verify the holder’s identity beforehand.
Premium savings
A special form of saving or a special type of passbook is premium savings. It belongs to the bank savings plans. Interest rates here are also variable. The difference from a regular passbook is that you commit to saving a fixed amount monthly. This amount is agreed upon when the contract is concluded.
Unlike a normal savings account, the credit institution also pays bonuses with this type of arrangement. These are percentage rates, fixed at the start of the investment, calculated on the amounts saved during the year. The notice period is three months. If the saver withdraws amounts from this savings deposit, no more bonuses are paid. The account is then continued as a normal savings account.
Saving with savings bonds
Another saving option is the savings bond. It is fixed-interest, meaning the issuing credit institution pays a fixed interest rate for the entire term, which is offered in various lengths. The savings bond is a registered debt security — the name of the holder is stated. Payment may only be made to the person named in the document. If the payment claim is assigned by cession, the new creditor must provide uninterrupted proof of the assignment.
Building savings (Bausparen)
With building savings, the investor enters into a contract with a building society (Bausparkasse). A agreed building savings amount is specified. Such a contract is often mediated through a credit institution. A particular feature of this form of saving is that it is one of the options for investing capital-forming benefits. The saver receives a subsidy on the amounts paid in in the form of the employee savings bonus (Arbeitnehmersparzulage) or the housing construction premium (Wohnungsbauprämie).
A building savings contract is divided into two phases. First comes the saving phase and then the loan phase. In the saving phase, the saver pays agreed monthly amounts into the contract account. These can be private payments or, as described above, capital-forming benefits.
In addition, interest is paid by the building society to the saver, as well as the employee savings bonus or the housing construction premium. All of this together forms the building savings balance. After several years of saving, a minimum balance is reached. This is a contractually agreed percentage of the building savings amount. Reaching the minimum balance is a criterion for the contract to become eligible for allocation.
Further criteria can be found in the general terms and conditions for building savings contracts (ABB). Depending on which building society you conclude the contract with and which tariff you choose, there are differences. If a contract is allocated, this means the building society releases the contract. The saver can have the balance paid out. In addition, they can take out the building savings loan, namely for housing-related purposes.
The various possible uses of the loan are listed in the Building Savings Act (BauSparG). The loan phase of the building savings contract begins when the saver starts making the agreed repayment installments. The repayment interest rate is already fixed when the contract is concluded. It is also possible to make additional repayments alongside the installments, up to full early repayment of the loan. Prepayment penalties are not charged by the building society.
Saving by investing in an investment fund
An investment fund is the separate assets (special assets) of an investment company. The company receives money from investors, pools it into this special fund and invests it in financial assets. These can be, for example, stocks, fixed-income securities or real estate. Investors purchase fund units with the money they pay in.
Putting money into investment funds is another way to save. This business is often mediated by a credit institution or a private financial advisor. You can also conclude a savings contract that includes the obligation to make regular payments. This is called a fund savings plan.
A securities account (custody account) is set up for the purchaser of the fund units. The investor does not earn returns through interest payments, but through the increase in the fund’s value. The units are traded on the stock exchange and are therefore subject to price fluctuations. The return depends on price developments. Funds differ in their composition. For example, there are equity funds that offer the prospect of higher returns but are associated with greater risk, and there are bond funds (fixed-income funds), which typically yield a lower return but also carry lower risk.
There are also mixed funds, which combine riskier and less risky components. Guaranteed funds are also offered. Here the repayment of a specified amount at the end of the contract term is guaranteed. During the term, these funds too are subject to price fluctuations.