The seven money drains in Germany — and how to stop them

Plenty of people cut open the toothpaste tube for the last drop and chase cents at the till — while thousands of euros a year leak away through doors they never look at.

Life in Germany is expensive; that is simply true. But severe thrift is not the answer. Closing the big gaps is. Here are seven of them.

1. Insurance — what you need and what you do not

The German rule of thumb: insure what would ruin you, not what would annoy you.

The consumer body Verbraucherzentrale sorts them into three groups:

• Indispensable: personal liability Privathaftpflicht and home contents Hausrat
• Useful depending on your situation: occupational disability Berufsunfähigkeit, term life, buildings, accident cover
• Dispensable: travel luggage, phone, bicycle and glasses cover, glass insurance and funeral plans

Note that health insurance in Germany is compulsory by law — not a matter of choice.

If your phone is lost you will not be ruined; you buy another. If you seriously harm someone else, or you can no longer work, that is where the real risk starts. Review your contracts once a year and cancel anything covering a loss you could absorb yourself.

2. Forgotten subscriptions

The gym you joined in January and visited twice. Phone apps, magazines, streaming, and the BahnCard that renews for a whole year on its own if you miss the cancellation date.

Do this today: open three months of bank statements, mark every recurring debit, and ask of each one: did I use this this month?

And for electricity Strom, gas and internet: compare every year. Prices in Germany move, and staying on the same contract for years usually costs more.

3. The car

A car eats money through three doors at once:

• Depreciation, Wertverlust — the largest and the most hidden, because it never appears on a bank statement
• Running and maintenance — fuel, insurance, the TÜV test, repairs
• Financing — if bought on instalments or on Leasing

Depreciation is at its steepest in a new car's first years. Buying one that is three or four years old puts you past the harshest part of that curve.

And in a large city, count honestly: how many times did you actually use it this month? Public transport plus a taxi when needed is sometimes cheaper than a car asleep outside the door.

4. Smoking — in numbers

One pack a day for forty years is 14,610 packs.

At today's German price — between eight and nine euros — that comes to between €117,000 and €131,000.

Had the same amount been saved monthly and invested at an assumed 5% a year, it would have reached roughly €370,000 over those forty years. At 4% it is about €288,000; at 6% about €485,000.

The return is an assumption, not a promise. Three figures are given for exactly that reason: the gap between them is wide, and nobody knows which will occur.

5. Impulse buying

When we are tired or unsettled, our ability to say no weakens. That is why things get bought at night that would not be bought by day.

Two habits break it:

• Never enter a shop without a list — Einkaufszettel
• The thirty-day rule — like something? Wait a month. If it is still on your mind then, buy it. Most things are not

And a rule worth sitting with: if you cannot buy it twice without strain, you cannot afford it.

6. Sleeping money and inflation

Leaving a large sum sitting in a current account Girokonto feels safe, and is not: the number stays the same while its purchasing power falls.

Directly: €20,000 left for twenty years, at 2% annual inflation — the European Central Bank's stated target — is worth about €13,500 in today's purchasing power. It has lost roughly a third.

At 1.5% it loses a quarter; at 3%, close to half. The rate makes all the difference, and nobody knows it in advance.

The rule commonly given in German consumer guidance: keep three to four months of your outgoings as ready cash — the Notgroschen — as your emergency reserve.

7. Investment fees

An annual fee looks like a small number. Its effect across years is not small.

Take €50,000 over ten years and compare an annual 0.2% with 1%:

• at a 5% gross return, the gap is about €5,900
• at a 7% gross return, about €7,000

Eight tenths of one per cent a year becomes thousands. Which is why the first question about any financial product is not 'what does it return?' but 'what does it take from me every year?' — the figure to ask for is the TER or the laufende Kosten.

The first practical step

Keep a household budget book — a Haushaltsbuch — for three months only. Not to economise, but to see. Most people do not know where their money goes, and those who see it spend less without deciding to.

Questions and answers

Which insurances do I actually need in Germany?
The Verbraucherzentrale calls two indispensable: personal liability (Privathaftpflicht) and home contents (Hausrat). Health insurance is compulsory by law. The rest depends on your situation.

Is phone insurance worth it?
The Verbraucherzentrale places it among the dispensable ones, together with bicycle, glasses and travel-luggage cover: all of them insure a loss that would not ruin you.

How much should I keep in my account?
The common rule is three to four months of your outgoings — the Notgroschen.

Does money in an account really lose value?
Yes, by the rate of inflation. €20,000 left for twenty years at 2% is worth about €13,500 in today's purchasing power.

Why do annual fees matter so much?
Because they are taken every year from the whole balance. The gap between 0.2% and 1% on €50,000 over ten years is roughly six to seven thousand euros.

Is a used car cheaper?
Usually yes, because the steepest loss of value happens in the first years, and a used car is past it.

How do I cancel a subscription I have forgotten?
Go through three months of statements, identify every recurring debit, and cancel what you do not use. Watch the notice period — the Kündigungsfrist — because some contracts renew automatically.

Please note: this page explains general principles of managing money. It is not financial advice and not a recommendation to buy or invest in any product. The figures are illustrative calculations with their assumptions written beside them; returns are not guaranteed and capital can be lost. We are not financial advisers — for your own situation, consult a licensed adviser or the Verbraucherzentrale.