Europeans May Have Missed €1.17 Trillion by Favoring Deposits

Money in deposits: Europeans have missed out on €1.17 trillion

European households may have missed out on €1.17 trillion by favouring bank deposits over investment funds, according to calculations by analysts at the ING banking group.

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Europeans save a lot, but a significant proportion of this money is still held in banks. Household financial savings currently account for around 6 per cent of their income — roughly two percentage points more than before the pandemic. This simultaneously reduces people’s spending and weakens demand for goods and services, notes Funds Europe.

According to ING, Europeans traditionally prefer deposits to investments in shares and funds. In the US, the situation is the reverse: households’ liquid investments are roughly five times the value of their bank deposits. In Europe, investments account for only about half the value of deposits.

ING has calculated what would happen if, between 2002 and 2025, a quarter of new deposits made by European households were channelled into investment funds. Their combined wealth could be €1.17 trillion higher. This represents around 7 per cent of the eurozone’s GDP.

If the same money had been invested in shares of publicly listed companies, the result could have been even greater – €2.79 trillion, or around 18 per cent of the eurozone’s GDP.

This is significant for the European economy not only because of the income generated for households themselves. Banks use deposits to grant loans to companies, but this is not enough to finance riskier and fast-growing sectors, including the technology sector. Direct investment in shares and funds provides companies with an alternative source of capital.

At the same time, Europeans are gradually beginning to change their habits. From 2025, 37 per cent of financial savings will be held in investment funds, including ETFs. Between 2015 and 2024, this figure stood at 24 per cent.

The balance between deposits and other assets has also shifted. From 2025, Europeans will be channelling more of their new savings into shares, bonds and funds than into bank accounts. The share of deposits in households’ liquid assets has fallen to 62 per cent, down from 67 per cent in 2019.

There remains considerable scope for further growth. Half of Europeans with savings are already investing, whilst a further 30 per cent are open to considering this option. However, many remain wary of the market: 42 per cent describe it as a ‘casino’, whilst 35 per cent admit that they lack knowledge about investing.

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