How are cash and interest rates different

Invest money and earn high interest rates - this is how it works

Valeria Nickel, April 20, 2021

German investors are creatures of habit: despite the current interest rates, which are permanently low, they cannot be deterred and they hardly change their savings behavior. More than 80% still rely on the savings book and save on the current account.

However, anyone who has set themselves the goal of investing high interest rates will not be happy with a savings account - the average interest rate in the years 2012 to the end of 2016 shows the drastic one Downward spiral:


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The difference between interest and returns

Interest = return? This is only partially true. Before investing money and focusing on high interest rates, it is important to understand the difference between these two terms: Interest is just a sub-category of returns.


Interest denotes the fee that savers receive for the transfer of credit - in short, that "Rent" for capital. Without this rent payment, a modern money economy is inconceivable, because nobody would have an incentive to make their capital available to someone else.

The amount of the interest payments is determined by the interest rate certainly. This is a percentage that indicates the “rent” for one year based on the capital employed. If the interest rate, amount and term are known, it is easy to calculate your own interest income.


However, there is also other types of returnsthat promise significantly higher profits, for example price or currency gains and dividends.

A major difference between interest and dividend payments is that the former regardless of the yield incurred by the debtor and not only when corresponding profits are available. As a result, interest payments for savers are substantial lower risk and more predictable and a big reason why fixed rate bank deposits are still so popular.

Fixed-term deposits and overnight deposits: Everybody’s Darling

In addition to the savings account, the overnight and fixed deposit accounts are still particularly attractive and safe investments to generate income by paying interest on bank balances, even if they are not very profitable at the moment.

Overnight money

At the Overnight money if you leave a certain sum of money to a bank for an indefinite period of time (usually 1-12 months) at an interest rate that can change daily. On the other hand, you can access your savings at any time, without notice to have to adhere to. If necessary, you can easily switch to a better offer from another bank.

Fixed deposit

In contrast, the Time deposit a form of investment in which there is no changing conditions gives. Terms, investment amount and the interest rate granted for it - the fixed interest rate - are already determined in advance.

The amount of fixed deposit interest is determined by various factors. The restricted Availability, the duration of the running time, the Principal amount and country-specific framework conditions are important influencing factors.

The monetary and interest rate policy is also responsible for the interest rate in the euro area European Central Bank (ECB) crucial. Against the background of the euro and debt crisis in some member states, it has been pursuing an extremely relaxed monetary policy with low interest rates for a long time. This has ensured that fixed deposit rates in Europe have fallen in recent years. They are particularly low in Germany and this situation is likely to last even longer.

To a certain extent, one could call overnight and fixed deposit accounts “wolf in sheep's clothing”. Because if you invest money at an interest rate as small as 0.07%, to lose Strictly speaking, you make money because of the inflationthat causes the purchasing power of the money invested to decline.

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How can you invest money at high interest rates?

Savers who are aware of this risk of loss through a small savings account, overnight deposit or fixed-term deposit interest remain three courses of action open how they can invest their money and get high interest rates.

Do you lack the capital that you can invest at high interest rates? Use savings plans to start building wealth.

1 | On the overnight money market: look for banks that also pay relatively high interest rates over the long term

During the term of the investment in a call money account, the interest rate can fluctuate daily. The bank with the highest overnight interest rate is not always the best option in the medium and long term.

One solution would be to look for banks from the outset that continuously yield good interest rates. But how can you best recognize these banks? Banks cooperate in collecting customer funds internal targetsthat must be met every year. As soon as these requirements are met, a bank usually lowers its interest rates quickly in order not to collect unnecessary capital. After that, they rise only very slowly, because private investors are very sluggish and very few switch immediately to another bank with better conditions.

So you have to find a bank with higher standards that does not cover its capital requirements so quickly. However, it is seldom known how high these requirements are. One clue, however, is that Size of the bank. Small banks with a small balance sheet volume or less international distribution usually also have a lower refinancing requirement than large international institutions, so that the interest rates here tend to be at the upper end in the overnight money comparison.

2 | Looking abroad

In addition, there are specific conditions in the individual countries that can influence the level of interest rates. The economic situation, the structure and competition in the financial industry, the need for credit and investment and savings behavior. Therefore, if you want to invest more profitable money, you should perhaps take a look abroad.

The advantage is that banks in the European Union have a Deposit insurance applies, which protects your savings up to € 100,000 in the event of bankruptcy - at least in theory.

3 | More risk-taking investments: asset classes with high interest rates


Anyone looking for a really profitable investment cannot ignore stocks. However, one must not forget: return and risk are directly related. The higher one, the higher the other. In this case, it is worthwhile to diversify your investment capital across countries and sectors sprinkleto minimize fluctuations in value.

Exchange-traded stocks are a particularly simple and inexpensive way of investing money in stocks Index funds (Exchange Traded Funds), ETF for short. ETFs track stock indices such as the Dax, S&P 500 or the world stock index MSCI World. For example, instead of buying the 30 shares of the Dax individually, investors can simply take an ETF share into the portfolio.

In contrast, with traditional equity funds, the Fund manager on the choice of shares. The goal of such actively managed funds is to outperform the market average. But that is often not achieved.

Equity crowdfunding

If you don't just bet on the stock market, but still want high interest rates on your investments, you could use Equity crowdfunding as an alternative investment opportunity. In contrast to non-profit crowdfunding, the donors here get their money back and the focus is on the return.

In crowdinvesting, many private investors join forces via an internet platform in order to be able to invest large amounts together. So they reach the thresholds of the high-yielding asset classes, the previously reserved for professional investors only were.

If you want to get involved in alternative asset classes, but at the same time on the Stability of value of real estate familiar, for whom real estate crowdinvesting could be interesting. Many real estate companies collect mezzanine capital through crowd investing and offer substantial interest in return. With investment opportunities brokered by BERGFÜRST, interest rates of 5.0% to 7.0% per year can be achieved and there is no minimum investment amount.

Real estate crowdinvesting: high interest rates, fixed terms!


Together with crowd investing platforms, more and more credit platforms are emerging (Crowdlending platforms), on which private borrowers and lenders can find each other. As an investor, you can also use the mostly high-interest loans as a high-yield capital investment - however, particularly high risks are to be expected here, as you can poorly assess the creditworthiness of your borrowers.

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