“Butter with the fish”: We won’t get very far with just 25 euros

Danes and Parthians Tom Salt

“Invest big” with small amounts. Banks, robo-advisors and information platforms advertise savings plans on stocks or exchange-traded funds, the ETFs. Like a mantra, it says: From 25 euros, oh well, from 1 euros per month, you can build up assets with us by investing in global stock portfolios or buying stocks in your favorite company.

Limited loss, participation in the increase in prosperity

That sounds easy and harmless and enormously lowers inhibitions and reservations about stocks. On the one hand, because not a lot of money is invested and so the losses are small in case of doubt. What are 25 euros a month? Three times cinema in the big city. Not so dramatic if they should be “gambled away”.

On the other hand, the mini entry-level savings allow even people with low incomes to participate in global economic development and build wealth. Almost everyone can squeeze 25 euros from their monthly income.

The opportunity to invest even with small amounts in stocks and funds such as ETFs is new, made possible by digitization, and absolutely to be welcomed. Participation in the prosperity gains of the global economy becomes egalitarian, i.e. accessible to everyone, and is no longer only accessible to wealthy people.

That is the sunny side. Let’s talk about the dark side, which is almost never discussed.

A lack of knowledge leads to financial damage

Simply putting your money into stocks or ETFs without really understanding what a stock is, how stock prices are created, what risks are associated with stocks and what impact our psyche has on investments. Or: How ETFs are created, according to what they are selected, which fluctuations in value are associated with them and how to deal with stock market crashes.

No expert knowledge is required for this. Basic knowledge is important. Own basic knowledge! So that the money is really used wisely and does not lead to losses through ignorance. How it happened to the versatile actress Caroline Peters. In June 2020 she gave an interview to the Süddeutsche Zeitung for the section “Let’s talk about money”. In this she honestly told about her biggest losing business – that was ETFs. Peters had been told that it was good “if you put on an automatic brake, so that from a certain amount of loss on the logarithm sells independently.” triggered the “brake” impulse (stop-loss order). Result: automatic sale with a four-digit loss.

The thing is: ETFs and automatic sell orders don’t go together for long-term wealth accumulation. Your own knowledge protects you from these and many other pitfalls when you just start investing.

Weigh in security

The other downside of mini savings is the feeling of security. With a false sense of security: I’ll do something and save for later.

But what does a € 1 savings plan bring in one of the Germans’ favorite stocks, Allianz AG, for example? The share is quoted at around 200 euros. With a € 1 savings plan, it would take us 16.6 years to own one Allianz share. If we choose a global ETF like the Vanguard FTSE All-World for around 105 euros, we need 8.75 years to buy a share. With a 25 euro savings plan, we own the Allianz share after eight months and a stake in Vanguard All World after 4.2 months.

Let’s do the math: 25 euros a month with a conservative market return of 5 percent invested in a broad-based ETF like the Vanguard, will generate assets of around 15,000 euros after 25 years. That is enough for an extra income to the pension over 25 years of about 70 euros. Better than nothing in any case. Just:

In order to close pension gaps and make us financially independent into old age, we need savings greater than 25 euros. They are good for investing for children and young people who still have little money. And for testing, get used to it, feel it, keep learning.

When it comes to strategic asset accumulation, more butter is needed for the fish. If, for example, 100 euros are invested in a global ETF for 25 years, assets of around 60,000 euros can arise (market return 5 percent pa). A monthly investment of 200 euros could turn into around 120,000 euros. This will close pension gaps. What does that mean in practice?

Small cattle also make crap, but large cattle make big ones

If you have never invested before, start with low savings. That practices. You can then increase this to amounts between 50 euros and 100 euros per month within a year. As a rule of thumb for the amount of the installments, it has proven to be practicable to invest at least ten percent of the net income in addition for the long-term pension in young to middle years. The older, the more likely it is to be 20 percent of net income. Time plays for us for a long time – but at some point it also plays against us. Therefore: Don’t let the additional pension hang down, get yourself financially smart, practice investing and increase your monthly investment contributions.


Danes and Parthians is a graduate economist, money coach, financial blogger and book author. Under the Geldfrau brand, she supports women in shedding their fear of finances and developing strategies for themselves, dealing with money independently and building up assets. Here you can find more columns by Dani Parthum