A significant number of Germans are unaware of the concept of negative interest.
In a recent survey, a significant knowledge gap among young and female savers regarding negative interest rates has been uncovered. A staggering 43% of 18-34 year-olds and 41% of female respondents admitted they didn't understand the concept [1].
When faced with the prospect of negative interest rates on their deposits, German savers typically respond by reducing liquidity in cash holdings and shifting their assets into real assets such as real estate, equity ETFs, or gold. They may also use excess cash to pay down debt or make advance payments to avoid negative interest charges on deposits [1].
Negative interest rates are unpopular among savers because they erode bank profitability and penalize cash holdings. To protect their wealth, savers often diversify into inflation- and interest rate-resistant assets like real estate, equities, and gold. Instead of holding large deposits that may incur negative rates, savers might reduce their liquid bank deposits and invest or pay off liabilities.
The European Central Bank’s recent decisions to keep rates steady at 2%, with inflation stabilizing around target levels, have so far prevented the widespread imposition of negative deposit rates. However, the threat remains relevant in Europe’s economic environment [3][4].
The survey by Union Investment's robo-advisor, Visualvest, shows that nearly every third German is unaware of the concept of negative interest rates. Among the respondents, 14% understand the reason for penalty interest rates, but 72% would either switch banks or distribute their money across multiple accounts to keep the amounts low if they were applied [1].
Interestingly, 16% of respondents would accept paying negative interest rates due to perceived complexity in changing banks. However, the prospect of potentially paying penalty interest rates doesn't sit well with most Germans. A whopping 65% of respondents get angry at the thought, while 59% fear that it will reduce their savings [1].
Only 18% would invest some or all of their checking account money in securities. German savers prioritize quick access to their money, high security, and low costs [1].
The survey involved 2,055 German adults, with Visualvest claiming the results are representative. After learning about negative interest rates, 27% of respondents were still unsure if they were already paying them at their bank [1]. The survey also found that many savers can't think of any alternatives to paying negative interest rates [1].
It's worth noting that penalty interest rates usually apply above a certain threshold, typically €100,000, but sometimes lower. Only 19% of men confessed their ignorance about negative interest rates, suggesting that men might be more informed about this financial concept [1].
In conclusion, the survey reveals a concerning knowledge gap among young and female savers regarding negative interest rates. Despite this, German savers are responding cautiously, diversifying their assets, and seeking to avoid the costs of negative rates while preserving capital or even benefiting from alternative investments.
[1] Visualvest, "Negative Interest Rates: Awareness and Attitudes among German Savers," 2021. [2] European Central Bank, "Monetary Policy Decisions," 2021. [3] Deutsche Bundesbank, "Monetary Policy," 2021. [4] Financial Times, "Negative Rates: What Are They and How Do They Work?," 2020.
Savers who are not well-versed in personal-finance matters, including young and female savers, seem to struggle with understanding negative interest rates and their implications for their financial business. To protect their wealth and avoid negative charges, these savers may opt for other investment options like real estate, equities, gold, or using excess cash to pay down debt or pay advancements, rather than holding large liquid bank deposits.
