The Hidden Cost Of Europe's Preference For Deposits

(MENAFN- ING) Europeans are beginning to invest more

Traditionally, European households have allocated most of their financial savings to deposits and cash holdings, as seen in the graph below. Over 2015-2024, the quarterly flows show that households in the eurozone allocated, on average, almost three times as much of their financial savings to deposits as to investment funds (including ETFs), and seven times as much to deposits as to shares (to enhance readability, one-year moving averages are used).

Since early 2025, a new trend has emerged. Europeans now allocate as much of their savings to investment funds and ETFs as to deposits. In fact, if we look at financial investments in the broad sense (stocks, bonds, funds, etc.), Europeans now spend more money on them on average each quarter than they put into savings accounts.

This marks a striking break with the previous decade, when deposits attracted around 2.5 times as much money as market-based investments. Direct purchases of listed shares have continued to decline, suggesting that the shift is taking place primarily through investment funds rather than individual stock selection.

European savings are starting to move beyond deposits

Eurozone quarterly financial transactions, households (& NPISHs), 1Y moving average, €bn

Note: Last datapoint is 2026Q1

Source: Eurostat, ING calculations

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The shift is not occurring at the same pace everywhere. In Spain and Belgium, households now direct considerably more of their financial savings towards investment funds than towards deposits. Investment fund flows have also increased substantially in Germany, although German households still place more money into deposits overall. Funds have overtaken deposits in Italy too, but by a smaller margin. French households remain among the least inclined to direct new savings towards investment funds, but have significantly increased their contributions to insurance, pensions and standardised guarantees, which we touch upon in this article.

Investment funds are gaining ground, but not everywhere

Average transactions over period, per household, €

Note: Per household numbers are obtained by dividing the average transactions over the period by the average number of households over the same period. What looks like a spike in pension transactions in the Netherlands for the period 2025-26q1 reflects accounting adjustments in the first quarter of 2026 due to pension reforms from defined benefits to defined contributions

Source: Eurostat, ING calculations

"> Europeans are cautious, but not opposed to investing

Many households appear unsure of when saving should give way to investing. According to our survey, while 37% of Europeans consider less than one month of income an adequate cash buffer, 26% want more than three months and another 26% do not know how much is enough. For many Europeans, the obstacle is not choosing an investment but deciding when they can afford to start.

Households remain unclear on how much saving is needed before they can begin investing

Respondents answer to: How much do you think a household should approximately keep in liquid solutions, easily accessible such as savings or current accounts, before putting any money into investments?

Note: Eurozone refers to the weighted average of the six representative countries

Source: ING Consumer Research

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Europeans are cautious, but not blindly so. Although 59% prefer safety and low returns, 46% would tolerate temporary losses for higher long-term gains and 61% understand that inflation erodes uninvested savings. Deposits remain dominant not because Europeans ignore the benefits of investing, but because liquidity and risk still feel easier to manage in cash.

Europeans see the cost of cash, but still choose safety

Eurozone average of respondents answer to: To what extent do you agree or disagree with the following statements regarding the risk of an investment?

Source: ING Consumer Research

"> What European household investments actually returned

Keeping money in deposits protects its nominal value, but limits households' exposure to investment income and rising financial markets.

Using Eurostat's household financial accounts, we estimate the historical total return on eurozone households' investment funds and listed equities. Unlike simulations based on a stock market index or an idealised investment product, our estimates track the portfolios households actually held. They incorporate the valuation gains and losses recorded on those assets, together with income received by investors, after the costs already reflected in the observed returns. The exercise therefore does not assume that households selected the best-performing products or followed an optimal investment strategy. It measures what their investments actually earned.

What €100 invested could have become

Estimated historical total return on the assets held by eurozone households, including valuation effects and investment income

Note: Total return combines valuation gains and losses with investment income. For investment funds, income includes amounts attributable to fund shareholders; for listed equities, it includes dividends. Historical performance does not guarantee future returns.

Source: Eurostat, ING calculations

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The results are interesting. Between 2002 and 2025, the investment-fund portfolios (which comprise both equities and bonds) held by eurozone households generated an estimated total return of 171%. In other words, €100 invested at the beginning of the period grew to approximately €271, including valuation changes and income received by fund shareholders. Over the same period, €100 placed in deposits by European households grew to €132.5 (+32% over the period, according to European Central Bank data).

Listed equities delivered an estimated total return of 302%, including market value changes and dividend income. €100 invested in 2002 therefore grew to approximately €402 by 2025. The same pattern appears over shorter periods: the portfolios actually held by households generated considerably higher cumulative returns than their initial value, although returns varied by asset class and investment horizon.

These returns are independent of how much households might have moved out of deposits. The size of the portfolio shift determines the amount of capital invested, but not the historical performance of the assets themselves (we take them as a given). The next question is therefore one of scale: what would these returns have meant for eurozone household wealth under a somewhat more investment-oriented allocation?

The macroeconomic cost of playing it safe

Europeans would not have needed to abandon deposits to make a meaningful difference to their wealth. We consider a simple counterfactual: what if eurozone households had invested 25% of the money they directed to deposits each year?

This changes the allocation of new savings, not the stock of deposits already accumulated. The amount reallocated therefore varies with annual deposit flows, while the remaining 75% continues to go into deposits. Between 2002 and 2025, deposits received an average of 48.5% of household financial-asset transactions. Under this scenario, their share would still have averaged 36.4%, or more than one-third of new flows.

Even this gradual shift could have made households substantially wealthier. If the reallocated flows had earned the total return of the investment funds actually held by eurozone households, financial wealth could have been around €1.17 trillion higher by 2025, equivalent to 7.4% of GDP. If invested in the listed equities actually held by households, the estimated gain would have reached €2.79 trillion, or 17.7% of GDP.

The longer the investment period, the larger the effect of income, market gains and compounding. Over 20 years, the estimated additional wealth reaches €810 billion in funds and nearly €2.0 trillion in listed equities. Over 10 years, the gains are around €266 billion and €695 billion, respectively. Even over five years, they amount to approximately €71 billion and €169 billion.

These estimates do not assume that households bought an index or selected the best-performing products. They use the estimated historical total returns of the funds and listed equities households actually held. Each year's reallocated flow is invested at that point in time and compared with what it would have earned in deposits. The reported gain is the difference between the two accumulated values, not the gross value of the investment portfolio.

The results vary with the asset class and starting year. Listed equities delivered higher returns over the periods considered, but with greater fluctuations. Their estimates are also less robust because dividend data does not cover all eurozone countries consistently every year. These figures should therefore be read as an illustration of the historical opportunity cost of favouring deposits, not as a forecast of future returns.

The conclusion is nevertheless clear: Europe's preference for deposits has cost households more than purchasing power lost to inflation. A moderate shift in the allocation of new savings could have produced materially higher household wealth over time.

How much additional wealth could a shift towards investing have created?

Estimated additional eurozone household wealth in 2025 relative to leaving the same annual amounts in deposits (and in % of GDP in 2025).

Note: Figures show additional wealth, not the gross value of the investment portfolio. Historical performance does not guarantee future returns.

Source: Eurostat, ING calculations

"> Europe's savings could work harder

Europe's preference for deposits has carried a cost not only for households, but potentially for the wider economy. Higher returns could support household wealth and, over time, consumption. Greater participation in capital markets could also direct more European savings towards business investment.

The first signs of change are already visible in the recent rise in investment fund flows. If that shift continues, Europe's savings could work harder on both sides of the economy, building more household wealth while providing more capital for growth.

Note on methodology

The analysis uses Eurostat household financial accounts to estimate the historical total returns on the investment funds and listed equities actually held by eurozone households. The longest calculation covers 2002 to 2025, reflecting the availability of sufficiently consistent eurozone data. The same approach is applied over 20-, 10- and 5-year periods.

Total return combines changes in asset values with investment income. As direct, fully harmonised eurozone revaluation series are not available for every component and year, valuation effects are estimated from annual changes in household holdings that are not explained by net transactions. This residual principally captures market-price gains and losses, although it may also include other changes in volume or statistical classification.

Investment income is taken from Eurostat's non-financial transaction accounts. Income attributable to investment-fund shareholders is measured relative to average investment-fund holdings, while dividend income is measured relative to average equity holdings. Where country-level observations are unavailable, annual income yields are estimated from the reporting eurozone countries and weighted by their corresponding household asset holdings. Dividend coverage is limited in some years, including for several large countries, which makes the listed-equity estimates less robust than the investment-fund results.

The estimated valuation effects and income yields are combined to calculate annual total returns. These annual returns are then compounded to show the historical performance of the portfolios actually held by households. The return series is independent of the size of the counterfactual reallocation.

The counterfactual applies one annual shock to household financial transactions. In each year, 25% of the observed transaction flow into currency and deposits is removed from deposits and invested instead. The remaining 75% continues to flow into deposits. This is a proportional reduction in each year's deposit transaction, rather than a fixed percentage-point reduction in deposits' share of transactions.

Two alternative destinations for the reallocated flow are presented separately. In the first calculation, the flow is invested in the investment-fund portfolio held by eurozone households. In the second, it is invested in their listed-equity portfolio. These are two illustrations of the destination of the same 25% shock, not two different shock sizes.

Each annual contribution earns the subsequently observed total return of the relevant asset class until the end of the simulation period. The same contribution is also accumulated at the return it would have earned in deposits. Deposit returns are derived from ECB household deposit-rate data and combine overnight deposits, deposits with an agreed maturity and deposits redeemable at notice, weighted by the outstanding balance of each category.

The reported wealth effect is the difference between the accumulated value of the counterfactual investment and the value of the forgone deposit position. It therefore measures additional wealth relative to the observed deposit alternative. It does not report the gross counterfactual investment portfolio.

The average transaction shares shown in Table 2 are calculated separately for each historical period. Consequently, the average observed deposit share and its counterfactual counterpart differ across the 24-, 20-, 10-, and 5-year calculations. For example, over 2002 to 2025, the observed average is 48.5%, and the counterfactual average is 36.4%. Over 2021 to 2025, the corresponding averages are 38.2% and 28.7%.

Financial account values are expressed in current-price millions of euros and converted into billions for presentation. GDP percentages compare the estimated additional wealth at the end of each calculation with eurozone GDP in 2025. Per-household figures are intentionally not shown in the revised table.

The results are historical counterfactual estimates. They are not forecasts, recommendations or expected returns for any particular investment product. Historical performance does not guarantee future returns.

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