Household Saving in Germany: Results of the first SAVE study

Abstract

Germany is an interesting country to study saving among older households since nearly everyone - whether in the middle income bracket or richer - saves substantial amounts in old age. Only households in the lowest quarter of the income distribution spend more between the ages of 60 and 75 than they save. Our paper exploits newly collected data, the first wave of the so-called SAVE panel, specifically collected to understand economic, psychological and sociological determinants of saving. Overall, we find extraordinarily stable savings patterns. More than 40% of German households save regularly a fixed amount. About 25% of German households plan their savings and have a clearly defined savings target in mind. Most of German household saving is in the form of contractual saving, such as saving plans, whole life insurance and building society contracts. This makes the flow of saving rather unresponsive to economic fluctuations, such as income shocks. Most households prefer to cut consumption if ends do not meet. In particular the elderly do not like to use credit cards, and they eschew debt. We suspect large cohort differences and will study them once further waves of the SAVE panel will become available.