Mental Models · Invest
Your savings account is losing money. Quietly.
Cash feels safe. After inflation, it shrinks a little every year you hold it. Watch what €100,000 does over 20 years, two ways.
Run your own numbersThe case for cash, made fairly
Cannot crash, Instant access, No debt, no stress, Perfect emergency buffer. For an emergency fund and near-term spending, cash is genuinely the best tool there is. It is a far weaker tool for wealth you will not touch for a decade.
The missing piece
The number goes up while the money buys less
That is the quiet trick of inflation: the statement climbs while your purchasing power falls. Tax makes it worse. At 2% interest, German Abgeltungsteuer plus inflation can leave your real return slightly negative, so cash quietly loses ground. The same cash put down on a leveraged property does the opposite, and the calculator below shows both in today's money.
€100,000 in cash · 20 years
−14% real
Started with
today's money
Worth in 20 yrs
after tax & inflation
Even with a positive 2% headline rate, after tax on the interest and 2.5% inflation your €100,000 is worth about €86,000 in today's money. The cash went backwards. Illustrative.
The inflation eroder
Toggle inflation to 0% to see the trick, the cash line goes flat and never climbs.
How is this calculated?
We track the real, inflation-adjusted value of a lump sum left in a savings account against the real equity of the same lump sum put down on a leveraged property. It is illustrative, not financial or tax advice. For guidance specific to your situation, speak to a licensed tax advisor.
The honest scorecard
We are not pretending property wins everything. Here is where each one genuinely comes out ahead.
Safety, no crashes
Instant access
Emergency buffer
Beats inflation
Leverage
Long-term wealth
When cash is exactly right
- Your three to six month emergency fund, keep it liquid, always.
- Any money you will need within about three years.
- You are still building a deposit, saving is step one on the way to property.
- You want zero volatility and accept a slow loss to inflation as the price of certainty.
Put your idle cash to work
The calculator above shows the principle. Our property simulator models a specific flat with real numbers, transaction costs and cashflow, using deals sourced by our property partner, so you can see what your deposit could actually buy.
FAQs
For short-term needs and an emergency fund, yes, cash is exactly right because it cannot fall in value and you can reach it instantly. The catch appears over the long term. When inflation runs higher than your savings rate, the balance grows on paper but buys less each year. The money is nominally safe and quietly losing purchasing power at the same time.
Nominal value is the number on your statement. Real value is what that number can actually buy after inflation. If you earn 2 percent interest while inflation is 2.5 percent, your nominal balance rises but its real value falls by about half a percent a year. The calculator on this page shows everything in real, inflation-adjusted terms so you can see the true picture rather than the headline number.
It narrows the gap but rarely closes it. Tagesgeld and Festgeld rates tend to track inflation rather than beat it, and in Germany the interest is taxable: above the €1,000 Sparerpauschbetrag (€2,000 for couples), savings interest is taxed at the Abgeltungsteuer of about 26.4 percent. After that tax and inflation, the real return on cash is often around zero or slightly negative. Cash is built for safety and short-term needs, not long-term growth.
Property tends to move with inflation in two ways: rents typically rise over time, and a fixed-rate mortgage is repaid in money that is worth less each year, so inflation erodes your debt rather than your savings. Combined with leverage, the same starting cash used as a deposit can compound far faster than it would sitting in a savings account. That is what the comparison here illustrates.
No. Everyone should keep an emergency fund, usually three to six months of expenses, in instantly accessible cash, plus anything earmarked for the next few years. The argument here is narrower: cash is the wrong home for long-term wealth you will not touch for a decade or more. The two jobs are different, and money for each belongs in different places.
Property can fall in value, is illiquid, and concentrates your money in one asset, those are genuine risks that cash does not carry. The point is not that property is risk-free, but that cash is not risk-free either: its risk is a slow, near-certain loss of purchasing power to inflation rather than a visible price swing. You are choosing which risk fits your timeline.