Savings interest is negative, so what?

The savings interest is practically 0%; at the large banks now about 0,05% and at Triodus 0% and yes, in specific situations even -0,5%. When will we get negative interest rates in the Netherlands? How long will we all wait for that or will we use other options?

There is plenty of savings in the Netherlands. According to the Central Bureau of Statistics, about €350 billion. With 17 million people, that equates to €20.000 per person. We continue to save, because then there is a buffer. But just as important is that it is safe. Just to give you an idea: we park €100.000 and receive €50 per year for this.

penalty interest
As it looks now (according to experts), we do not have to count on an interest rate rise for the time being. If this already happens, it is expected that this will first be the case with the interest that you have to pay and only later for the interest that you receive. All this is the result of the purchase program of the European Central Bank (ECB).

She has indicated to halve this in 2018, but that still means that an extra €30 billion per month (€1 billion per day) will become available. Banks can attract money at the 3-month Euribor rate. Today it is -0,328%. The banks therefore receive money when they borrow.

They are not waiting for more expensive savings from you. No, we seem to be closer to a negative interest rate than an increase. In Germany, this already happens with savers with balances of more than €100.000. They call it 'penalty interest'. This is being opposed and lawsuits have even been started in which the judge ruled in December 2017 that it is against the law.

All in all, I think you can wait for the fact that we in the Netherlands will also have to deal with penalty interest. In fact; We have already received the first messages from the Triodus Internet Affairs Account. I quote: "From February 15, 2018 you will pay 0,5% annual interest on the part of the balance that is higher than $500.000." I don't think you should want that.

2 streams of entrepreneurs
Looking high over the agricultural sector, we see 2 streams of entrepreneurs; on the one hand the stoppers and on the other hand the developers. That in itself is nothing new, except, and you should not underestimate that, that developments are accelerating and the required capital is increasing. In addition, the banks adopt a strict risk attitude, which means that they are less generous. Banks only make the necessary money available and would like to see it repaid faster than before.  

So if you, voluntarily or not, are a stopper and you sell the company and pay off the loans, you're still screwed. Let's assume that you have €500.000 left, then you will now receive €250 in interest per year on an annual basis. How far do you have to be to accept that? Knowing that next year you may just have to pay $250 or more. If we add inflation and the capital gains tax to that, you quickly have a return of 4% negative.

Property
So my suggestion is mostly not to wait for all of this to become your reality, but take action. It is quite common to choose to invest with part of the assets. Yourself or through an asset manager. A great alternative if you have a good feeling about it and if you want to sleep peacefully if the stock market performs less rosy than expected.

Another good alternative is investing in your own trusted sector, for example in a colleague's farm. You can do this by setting up a cooperation structure or by renting out your land through liberalized leases. In this way you do not get that large amount of savings, but you remain the owner of real estate. A tried and tested and successful method of well-known and successful business families in the Netherlands. Another possible interpretation is that you partly sell the company and partly provide the financing for this.

Farmers finance farmers
In summary, I call this: 'farmers finance farmers.' If you want a return for your money, you have to do more than park it in a savings account. I give everyone the space to make their own financial decisions. The facts show that most of us are not quite suitable for that after all and getting expert help is a wise decision. After all, everyone should do what they are good at. But yes, if you keep thinking that this mainly applies to others, you apparently still have too much money.

Peter Pals

Peter Pals is an entrepreneur at Farmers Funding & Advies and grew up on a farm. From his farming heart, he has decided to build up a business for business, financial and tax advice for agricultural entrepreneurs.