Learn to Live Debt-Free Life from Germans

For many people in India, debt is a part of life. They take debt for almost everything – from purchasing a small home appliance to a luxury car; a small party at home to a wedding reception and the list goes on. They feel debt as an acceptable way of living.

But, there is a country where people believe ‘debt is guilt’ or ‘debt is sin’. They say, “If you have to borrow money, then there is something wrong with you”.

This country is Germany – the world’s second largest exporter and Europe’s economic powerhouse that alone stopped Eurozone falling back into recession. It is a rich nation which influenced in saving Euro. In this article, we will read more about Germans and their lifestyle.

Historical experience with hyper-inflation
Germany was a poor country until 19th century and had tough experiences with credit. During the World War I and II, citizens of Germany lent money to the government in the form of war bonds. Later after a period of time, the country lost its currency value and there was an extreme disaster faced by the lenders. Due to the hyper-inflation, the country lost all of those debts of the government. Even today after three generations, the fear of inflation and debt still exists in entire Eurozone.

No credit – cash only culture
Today, German consumers are remarkably debt-free. There is a low penetration of credit-card in the country. Most of the banks refuse to take credit cards. They prefer to have transactions through cash. Due to fear of debt, German banks are opting ‘no credit – cash only culture’.

Only 36% of Germans possess a credit card, compared with 58% in India. Even if they have a credit card, the limit is usually tied to a customer’s bank balance and the credit card bill is automatically paid off from the customer’s account within a month.

Germans encourage savings
So far, inside the Euro zone, Germany and other northern countries are running huge current-account surplus, while rest of the southern countries are running very large current-account deficits and may end up heavily indebted to the northern countries. Credit played a huge role to finance in these countries but, that never happened in Germany.

Most of the banks in Germany encourage savings with average interest rate of 3.25%, whereas in India it is 4%. Though interest rate on savings deposits is little lower, the net household savings rate in Germany for the year 2012 is found to be above 10% whereas in India, it is 7.8% during 2011-2012.

Every year around October, the country celebrates World Saving’s Day. Children in Germany bring their savings to the banks and get some little toys and balloons in return.

Germans love to talk about thrift as part of their national character. Thrift is an integral part of their identity. In most of the German families, it is clearly seen that women demonstrate their cleverness by controlling the family’s spending and boosting savings.

We, Indians, need to learn and inspire from Germans by their way of frugal living.

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