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How To Build Your Savings Fast While Living in Germany

The money you get as a gift, you do not have to save yourself! Therefore, take advantage of all the opportunities that are available to you. There are several opportunities such as employer-sponsored benefits, employee savings supplement, housing premium, occupational pensions by which you can build your savings fast.

If you use the individual offers and combine them cleverly, you will be able to handle your money optimally!

How To Build Your Savings Fast

Whatever amount your employer pays you in the additional salary, it may be in the collective agreement or in a company agreement. There are considerable differences.

Currently public sector employees receive € 6.65 each month, and some companies pay the maximum of € 40. In principle, everything is possible.

If your employer pays you an additional amount, you are entitled to it during your apprenticeship, but not in the probationary period.

Capital savings contracts run for seven years. Six years you pay, one year the contract is suspended. After a total of seven years, you can finally dispose of your money.

You have the following possibilities for the investment of the capital building

Bank Savings Plans

Bank savings plans are more suitable for risk-averse investors. The interest rate is variable, it varies according to the market rate rises. The interest rate will be less if the market interest rate drops. At the end of the term, the providers usually pay a final bonus.

Savings Contracts

Well, if you ask me the same question again how to build your savings fast, my first answer will be about saving contracts before going in some details.

Some building societies pay good interest on a pure savings contract, if you do not claim a loan. For such a system, a relatively savings target of 5000 euros is enough.

A higher Bauspar sum is then correct if you want to use the Bauspar contract later for building or modernization. However, it does not have to be more than 10 000 euros (this keeps costs for concluding the contract within limits).

If the contract is awarded before the end of the seven-year lock-up period, you will still not lose government support if you use the Bauspar contract for residential purposes (eg renovation).

Repayment of a Construction Loan

It is known that it is possible to pay off building loans with capital savings. There are two variants.

You can have the capital goods transferred to your account. The credit institution then submits to the employer that its payments have been used for debt settlement. It is therefore, easier if the employer transfers the sum directly to the building loan account.

Equity Funds

For equity funds, you have the highest odds, but of course a higher risk of loss than the VL other options. The one who is young and can plan a long investment time should opt for this austerity.

The fact that the VL contract ends after seven years is no obstacle. You can leave the accumulated credit in the equity fund for as long as you want, and profit from the higher opportunities.

Not every equity fund is authorized for VL savings contracts. To find out which equity funds are suitable, contact your bank and independent advisers.

Occupational Pensions

Direct insurance is particularly lucrative. You can capitalize on your retirement benefits and also save on taxes and social security contributions.

Example: A 30-year-old woman who earns 2,500 euros gross pays 40 euros a month in direct insurance. However, their contract will be credited with tax and social security exemption but 85 euros. Until the age of 67, she earns a lifelong monthly pension of about 250 euros!

That’s The State

Bank savings plans are not supported, direct insurance offers immediate tax savings.

The Employee Savings Allowance

There are two funding areas for capital goods services that you can also use in parallel. The investment in equity funds is promoted the highest. However, you will only receive the employee savings allowance if you do not exceed the following income thresholds:

For equity funds: single persons 20 000 euros per year, married 40,000 euros per year.

The employee savings allowance for equity funds since April 2009 is 20% on a deposit of 400 euros, ie 80 euros per year.

If you prefer to pay your VL into a home savings contract, there is a 9% employee savings allowance on an annual deposit of up to 470 euros per year. That’s 43 euros a year.

The income limits are: single person17,900 euros, married 35,800 euros.

Of course, if you want to deposit both in an equity fund and in a home savings contract, you can also increase the savings amounts from your own pocket. You would then have to ask your employer to convert the missing amount of your salary into capital contributions and pay them into the subsidized savings contracts. Of course, you will also receive government subsidies if your employer pays nothing and you pay all the savings out of your own pocket.

Housing Bonus

Another way to obtain government subsidies is to save money under the Housing Premiums Act.

The following income limits apply here: single person 25 600 euros per year, married 51 200 euros per year.

If you pay € 512 per annum (married couples double) into a building society savings contract, the state pays the housing premium of 8.8% of the annual payments – at most € 45.06 (married couples € 90.11).

The housing premium you get only if you use the savings account residential. It can be used for the repair and modernization of an existing apartment. This means fittings that are firmly connected to the building, such as closets, toilet or sink. You can also lay parquet, tiles or carpet, provided that the flooring is firmly connected to the substrate.

You apply for the employee savings allowance each year with the income tax return from your tax office. For this, you will receive from the fund company a corresponding certificate, which you must attach to the annual tax return.

how to build your savings fast with housing allowance
how to build your savings fast with housing allowance

You apply for the housing premium through your building society. For both saving forms applies: The allowances pay the tax office only at the end of the seven-year blocking period in the savings contract. Then you can dispose of the accumulated sum freely.

Riester Pension

There was a basic allowance of € 154 and an allowance of € 185 per child born before 2008. For children who were born from 2008, still receives 300 euros. And professional newcomers who are not yet 25 years old, the state gives a one-time amount of 200 euros.

Up to 2100 euros can be deducted annually from the tax.

There’s something for free: With compound interest and time to assets

You know, there are seven wonders of the world officially. The eighth wonder of the world is compound interest because of its phenomenal, incredible impact.

Basically, it’s simple:

For example, assuming you have invested $ 10,000 and receive 4% interest annually, that’s $ 400. If you do not withdraw these 400 euros, but again hit the invested amount, one year later not more 10 000 euro interest, but 10 400 euro.

The interest is then no longer 400 euros, but 416 euros. And so it goes on, year after year. While your deposit stays the same, the interest rates are compounded and add up to a high-value growth like the snowball effect.

And why is time important?

Because in the first years of compound interest develops only slowly. The longer you keep your money invested, the more it gets going. The compounding effect unfolds its incredible effect by the time factor.

Take a look at how interest rates and time work for you. Your money is growing without you having to do anything about it.

Compound interest effect with 150 euros per month. The compound interest effect is of particular importance for long-term retirement planning. It works with fund savings plans as well as pension insurance, but only over long periods. That’s why it’s so important that even young people start saving, even with small sums. Because they have 40 years and more time to build savings fast.

To wind up this article about how to build your savings fast the conclusion that I draw is that the later the entry, the more money you have to spend to reach your goal, because there is less time available.


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