You diligently leave your savings in your German current account, and watch them earn precisely nothing while inflation quietly erodes them. The German Girokonto is built for paying rent and getting your salary, not for growing money, and treating it as a savings account is a slow, invisible loss. Germans know to move spare cash into proper savings accounts, Tagesgeld and Festgeld, which actually pay interest, are protected up to €100,000, and come in flexible and locked-away flavours. Knowing the difference, and that your current account is the wrong place for savings, is a small piece of financial literacy that quietly improves your finances here.
This guide covers German savings accounts: why the current account pays nothing, Tagesgeld versus Festgeld, deposit protection, the tax on interest, and where to keep your money. Stop leaving your savings idle.
Your current account pays nothing
The starting fact: a German current account (Girokonto) pays essentially no interest. It is for daily transactions, salary in, rent out, card payments, not for saving.
So money left sitting in your Girokonto earns nothing while inflation erodes its value. This is the quiet mistake many people make: treating the current account as a default home for savings, when it is the wrong place for any money beyond what you need for daily spending.
To earn interest on your savings, you move money into a dedicated savings account, a Tagesgeld or Festgeld account (below), which pay meaningfully more than a current account. The bank you use for daily banking may offer these, or you can open savings at a different bank for a better rate.
So the first principle of saving in Germany: do not leave savings in your current account. Keep only your daily-spending money there, and move the rest into a proper savings account that actually pays interest. It is a simple move that stops your savings sitting idle.
Tagesgeld vs Festgeld
The two main savings-account types, and the choice between them:
Tagesgeld (instant-access):
- You earn interest and can withdraw any time
- Variable rate (can change)
- Best for flexibility, money you might need
Festgeld (fixed-term deposit):
- You lock your money away for a set period (months to years)
- Fixed rate, usually higher than Tagesgeld
- You cannot access it until the term ends
- Best for a higher fixed return on money you will not need
So the trade-off is flexibility versus rate: Tagesgeld lets you withdraw any time at a variable rate; Festgeld pays more but locks your money for the term.
How to use both:
- Money you might need (emergency fund, short-term savings) → Tagesgeld (instant access)
- Money you definitely will not need for a period → Festgeld (higher fixed rate)
Many people use both: Tagesgeld for accessible savings, Festgeld for a chunk they can lock away for a better return. Compare rates across banks, they vary, and the best Tagesgeld/Festgeld rates are often at direct/online banks rather than your main branch bank.
Your savings are protected
A reassurance for keeping cash in German banks: deposits are protected.
- Deposits in German (and EU) banks are protected by deposit-guarantee schemes up to €100,000 per person per bank (the EU-wide standard)
- Many German banks have additional voluntary protection beyond that
So your savings up to the guaranteed amount are safe even if a bank fails, making bank savings accounts a secure place for cash. This is the safety net that makes Tagesgeld and Festgeld low-risk homes for your money: you earn interest, and your principal (up to €100,000 per bank) is protected.
A practical implication: if you have more than €100,000 to save in cash, spreading it across banks keeps it all within the protection. For most people, the €100,000 guarantee per bank comfortably covers their cash savings, so a Tagesgeld or Festgeld account is both interest-earning and safe.
This protection is part of why bank savings accounts are the right home for your emergency fund and short-term cash, you want that money safe and accessible, not at market risk. For longer-term growth, investing carries more risk and more potential return (below).
Tax, and where to keep what
Tax on interest: interest is subject to the flat capital-income tax (Kapitalertragsteuer, around 25 percent plus surcharges), like other investment income. But the annual tax-free allowance (Sparerpauschbetrag, €1,000 per person) shelters interest within it, so set up a Freistellungsauftrag with your bank to keep interest up to the allowance untaxed. This is the same allowance that covers investment gains, so it is shared across your interest and investment income. (Note: interest is taxed under this flat regime, unlike crypto, which has its own rules.)
Where to keep what, the practical allocation:
- Emergency fund and short-term cash → Tagesgeld (instant access, safe, see how much emergency fund)
- Money you can lock away for a set period → Festgeld (higher fixed rate)
- Longer-term growth (beyond cash savings) → investing (such as an ETF), usually better than savings accounts over the long run, though with risk
So the layered approach: keep your safety cash in Tagesgeld (and lock spare cash in Festgeld for more interest), and put long-term money into investments for growth. Do not leave savings in the current account (no interest), and do not keep all your money in cash savings if you have a long horizon (investing beats it long-term). Match the home to the money's purpose and timeframe, and compare rates since they vary by bank.
The bottom line: your German current account pays nothing, so move savings into Tagesgeld (instant access) or Festgeld (locked, higher rate), both protected up to €100,000 per bank. Mind the tax on interest (use the Sparerpauschbetrag allowance), keep your emergency fund in Tagesgeld, and invest for long-term growth beyond cash. A simple reallocation that stops your money sitting idle and starts it earning.
What to do this week
- Move savings out of your no-interest current account into a Tagesgeld (instant-access) account for accessible savings and your emergency fund.
- Lock money you will not need for a period into higher-rate Festgeld, and compare Tagesgeld/Festgeld rates across banks since they vary (often best at online banks).
- Set up a Freistellungsauftrag so interest within the €1,000 allowance is untaxed, and use investing (not cash savings) for long-term growth.
