The recent developments in the money market indicate that interest rates for overnight and fixed-term deposits in Germany are under pressure. On June 6, 2024, the European Central Bank (ECB) lowered key interest rates, which presents both opportunities and challenges for savers. While the inflation rate remains above the targeted goal of two percent, a decline in inflation has been observed in recent months.
Woman Putting Coin In Piggy Bank
Impact of Inflation with and without Fixed Deposits
| Current Account | Fixed Deposit Account (3.70% p.a.) | |
|---|---|---|
| Amount | 1.000 € | 1.000 € |
| Inflation Rate 2,4 | -23,44 € | -23,44 € |
| Interest Earned | 0 € | 37 € |
| Value After One Year | 976,56 € | 1013,56 € |
Invest broadly
Recent developments in the money market, particularly adjustments in key interest rates, have significant consequences for savers. It is advisable to secure current interest offers for fixed-term deposits to benefit from existing conditions. Nevertheless, investors should make well-considered decisions and thoroughly reassess their savings plans.
Key Considerations for Savers
Before making a fixed-term deposit, consider the following questions:
- How long can you do without your savings? The term of your investment is crucial as it affects the interest rate offered; generally, longer terms yield higher rates.
- Have you compared different banks and their rates? It is worthwhile to look at offers with varying terms. A mix of fixed deposits with different maturities, such as one for 6 months and another for 12 months, can provide flexibility.
- Have you considered international offers? In some European countries, fixed deposit rates are higher than those in Germany. Diversifying your investments across different providers can also minimize risk.
Security of Investments
It is important to note that deposits in fixed-term accounts are typically insured up to €100,000 per person and bank under statutory deposit insurance. This also applies to banks located in other European countries, providing additional security for savers.
Interest Rate Trends and Investment Strategy
While current fixed deposit rates are attractive, they may slightly decrease in the future. Therefore, securing current rates for an extended period could be advantageous. A strategy known as “laddering,” which involves combining different maturities, can also be beneficial. This allows savers to take advantage of higher rates while maintaining access to portions of their capital in the near term.
