How should I use my savings

Let’s say you are a 18 years old, and you are an apprentice builder. Your net income is about €1,600 per month, and you still live with your parents. The first answer to the question of what to do with your money is probably to spend it. Spending money is fun, but even small sums add up if you spend them regularly on things like dining out or taxis – your money will disappear quickly even though there’s not a lot left to show it.

The second answer may be to save money. At the moment, we are experiencing hidden inflation – interest rates on savings are lower than the overall inflation rate, which means that the value of savings in the bank goes down even though interest accrues on deposits. Does it make sense to park money in a savings account? Not really. But what other options are there?

The earlier you start to invest some of your income, the longer the investment will generate returns for you. Most people keep a nest egg of about three to four times their monthly income for emergencies. If you still live with your parents, you probably do not have to cover any fixed costs such as rent, electricity and water bills, which means you can save a substantial part of your income if you use only some of it for spending. You can put your money in long- or medium-term investments.

If you are considering a medium-term investment, a home savings account may be an interesting option. You can open it for a term of six years, for example, during which you could pay in € 100 every month. The money is automatically debited to your account every month, and after six years, the accumulated capital plus interest is paid out; depending on the interest level, you receive about € 7,500. That may come in handy for a down payment on a rented apartment, for example. And what about a long-term investment?

There are a number of long-term investment options, for example investing in funds for a pension in later life. Funds re-invest the money they receive in stocks and bonds, among other things. Many different investment vehicles of this type are available, including short-term funds with higher risik and longer-term ones with defined maturities and lower risk. But in any event, you should get as much information and advice as possible to find an investment product that is just right for you. Author: Niko Moshammer For more about this topic, see Factsheet - Factsheet- Gewinn und Risiko.