Personal Finance for Students in Germany

Personal finance is the process of managing your finances and lifestyle. It includes topics like budgeting, banking, insurance and retirement planning. You can also do things to invest or save money for later in life. Thats why I want to talk about Personal Finance for Students in Germany.

No matter how good your grades are, as a student, finances are probably not at the top of your priority list. However, this does not mean you should neglect it. Especially with the rising costs of college tuition and more parents being unable to cover education expenses, being able to start saving early is important. As a Student, the financial decisions you make will affect your life for years to come. 2/3 of Millennials regret their financial decisions made in college.

Student Debt in Germany

Even though Education in Germany is Free with the exception for one State ( Baden-württemberg). Accumilating debt is quite common especially after the pandemic.

This can have negative effects on your the future, for example by affecting your credit score adversely or hampering your ability to save for retirement. From the place where you live to what you eat, all these decisions will affect your life once you’re done with being a student so Minimizing your debt now will make life much easier later on.

Why should you care about Personal Finance as a Student in Germany?

One question that might come to your mind is “ Why should I care about Personal Finance as a Student in Germany”

Let me ask you, “Where do you see your self in 5 year”, I know its a very difficult question to answer but Indulge me for a moment?

Most of you might think, I would be finished with my studies having a Great job. Vacations all over the world and maybe a nice car?

Sure some might be able to achieve this goal but for many this will not be the reality. I am not saying this to demotivate you, on the contrary I want you to realize that this is not a reality for many, specially for those who do not take care of their finances.

Why starting early matters

Students generally live modestly but some often splurge and buy expensive things. Yes getting a phone on contract can be very enticing, 50euros per month for the latest Iphone might seem cheap but do you really need all the features? do you actually use them?

After finishing your studies and getting a job your Lifestyle would also inflate, now that you are used to 50euros per month for a mobile phone 70 Euros would mean nothing. Why stop there, why not get a car, you can get one on relatively decent interest rate. 100Euros to get started why not?

Things keep piling on and on and this becomes a habbit for life. So starting early becomes absolutely critical!

How to Manage Money as a Student in Germany

The basics of financial planning can sound very simple: Spend less than you earn and save for the future. This however is easier said than done.As a student, it is important to be self-sufficient and take control of your finances. You can either rely on your parents & credit cards or avoid the temptation to buy unnecessary things and take control of your money.

If you choose to take control of your Personal Finance as a Student in Germany, it will definitely be more difficult but rewarding at the end. As your time as a student would help you create a long term habbit of Managing your finances. Rice and bean today will eventually lead to Gourmet meals later on in your life.

German Student monthly expense management

To optimize our Personal Finance as Students in Germany we can start with your Monthly expenses.

List every thing you spend your money on.

Starting with the essentials,

1. Rent
2. Insurance
3. Travel Costs
4. Education costs

How to save money on Rent in Germany

Ask your friends, how much rent do they pay. Are they living alone? If not how many people live in the apartment? How far away is their accomodation from the university?

Ask as many people as you can and get an estimate to how much your friends are paying, trust me chances are that you are paying too much in rent! If you can move to an apartment with 4 other people and save 50euros a month do that, instead of having your own room with a kitchen and a toilet. You will not only save money but also make new friends and learn new things from people.

Is Private health insurance better than Public Health Insurance in Germany?

Health insurance is a very polarizing topic, as many students pay 100 odd euros a month for the public health insurance and never even visit a physician. Some prefer to pay 40 euros for private insurance and save that extra 60euros. I didnt even have a Hausartzt in my first 5 years in Germany. So thinking back, having private insurance would have saved me hundreds of euros. But then again I could have gotten sick like a friend of mine who needed major surgeries and didnt have to pay anything as the public insurance covered all the bills. So here I would say whichever option you opt for is ok.

Save Money on Travel Costs or Rent as a Student in Germany?

If you can move 10 minutes farther away from your university and save 20 to 30euros per month in Rent I would say take that deal! Obviously these chances come rarely as finding a decent accommodation in a large city is very difficult to start with. But try to find a decent compromise. Some universities offer a semester ticket with their semester fee some don’t. Here you need to figure out if this semester ticket actually makes sense for you? Can you opt out of it if the ticket doesn’t make sense?

Education Fee in Germany

For education costs there is a semester fee between 120 to 300 Euros and the higher costing semester fees often includes a semester ticket, only exception being Baden Wurtemburg with a 1500euro additional fee for Non-EU International Students.

Pro tip here is to keep track of each and everything you buy for your studies, no purchase is small enough! Bought a pen? Write it down, Bought a notebook? Write that down! You can claim all expenses you do for your education in a Tax Return after you do a full time job! Trust me this small hasstle will be worth it in the future!

With the things mentioned earlier, you dont have to think that often. Next come the variable costs, and here is where you have the most room for management!

I divide this into two categories,

First being Food and Groceries and the second being Travel and clothing

Food and Groceries costs for Students in Germany

As a student, Home cook pasta should be the food you eat most often ! Even if you dont like to cook, you have to do it. You can learn to batch cook or do food prep, trust me its not that difficult! And it can save you a bunch of money which you can put to good use. When you go to buy groceries try to buy in bulk as it will be cheaper, try dividing your groceries with your friends or housemates as this can definitely save you some money!

Travel as a student or save that money?

For Travel and clothing, I say to have a fixed budget for a month. If you have a semester ticket try to explore the region covered in your ticket first before thinking of your first trip to Paris. You can go to other countries but instead of going with a couple of friends try to join student groups for your travels. These groups are cheaper than planning and going on your own. A quick search on facebook can be very helpful. Also ask around in your University. most Universities have International Centres who organize cheap field trips.

Try to write down each thing you spend your money on, at the end of the month try to see what can you spend less on. Why did you spend 120Euros in H&M, what can you do to reduce that?

Expenses as a Student in Germany (my own expenses)

Let me tell you about my expenses when I was a student. Now this is obviously my case and pretty old ( I was a student between 2015 and 2017) so please know that I am aware that not many can replicate this.

How moving apartments helped me get Healthy

My University is in a Small city, so rents were not that expensive. I got a room in a house with a German couple and another student, the rent was pretty low being 260 Euros including all the costs except the dreaded TV Tax. I know this is cheap but I asked around and my friends were living for way cheaper than me. Most had a rent between 180 to 240 Euros. So after my first month I moved to a cheaper accommodation which saved me 20 Euros.

I used this 20Euros to register in a Gym which was one of the best health decisions of my life! For food I had a fixed budget of 50Euros, and that included my 18 Euros protein powder. I used to buy things in bulk and do food prep. I remember going to the Turkish shop once and buying 20 bananas near expiry for 99cents. In order to stop them from spoiling I just pealed and froze them. Banana shakes for 2 months!

Cheapest ways I travelled in Germany

In my first semester I didnt do much traveling on my own, I had registered with the International Center which organized very cheap trips. 7 Euros for a day trip to Heidelberg including a tour of the castle with a travel guide. 5 Euros to Konstanz and many more making about 20Euros per month

Only in my second semester did I travel outside Germany.

As I mentioned earlier I have always had the Public Health insurance which cost about 98Euros per month. And for clothes and everything else I alloted 20 Euros per month

Taking my total monthly expenses to 440Euros. I know thats almost impossible these days, let me know in the comments how much to you spend in a month on an average?

One thing I really wish I had done was to note all my educational expenses. As this would have given me great tax returns! So this is exactly what we are going to discuss next.

How to Manage Taxes as a Student in Germany

This is a complex topic and not every case is the same so I will try to provide information that applies to the majority

Firstly you might ask: What are the different tax classes in Germany? Well there are SIX tax classes in Germany.

In many cases filing a tax return is not mandatory for example if you are in tax class 1 or are married and both partners are in class 4/4 combination then you are not legally obligated to submit an annual tax return.

Most students usually dont have a registered partner in Germany so they are taxed on Tax class I and many also have only 1 job at a time, so its not necessary for them to file a tax return. But if you are someone who has multiple jobs at the same time then one of the jobs will be taxed at tax class 6 where you will have to pay higher taxes, and you are also obliged to file a tax return the next year.

Tax Decleration deadline in Germany

For all mandatory filers the deadline is generally the 31st of July of the following year. But sometime there are extensions as well.

For voluntary tax return one can apply for up to 4 years in the past, so in 2022 a student can apply a tax return for 2021, 2020,2019 and 2018. Additionally, you can carry forward losses up to seven years (verlustvortrag) more on that later in the video.

If you were obliged to submit a tax return and did not submit it, then you will have to pay a fine which keeps on increasing the longer your wait to file your taxes.

The late fee is 0.25 percent of the assessed tax, but at least 25 euros per month late. A maximum of 25,000 euros will be charged for late arrival.

What can a Student in Germany claim in a Tax filing?

Now here comes the interesting part, as a student you are entitled to make a claim on everything you paid for which helped you in your studies.

Deduct Study costs in Germany

Lets start with your Studies costs. In your tax return you can claim your

1. Semester fee
2. University registration fee
3. Exam fees
4. Any other fee that you can prove contributed in your studies.

Acquisition Costs for students

You can also claim study aiding materials too in Acquisition costs. The tax office usually accepts a fixed flat rate of 110 € in this category without mentioning anything- but unfortunately there is no guarantee of recognition. If your expenses are higher than 110€ you can add all the individual costs .

You can also include electronic devices that you have purchased in previous years.

So in this category, you can claim buying

1. Laptop
2. Printer
3. Smartphone
4. Any Software
5. Technical literature that you bought to aid in your studies
6. Printing costs
7. Pens , paper etc.

Remember if these acquisition costs are more than 950€ then these costs will be carried forward to next year as Tax loss carry forward or Verlustvortrag which I will discuss later on.

Claim Transportation Costs as a Student

Students can claim transportation costs from their house to the University at a rate of 30Cents per kilometer. But these can only be claimed for one way costs.

You can also claim travel costs to Seminars, the library or any other study events and here 2 way costs will be accepted (30cents per kilometer)

A simple example would be a student who visits the University 100 days in a year and in the same year they went to the library 50 times, their house is 10kilometers away from the University and the library. So their claimable travel costs would be 600€

Travel Costs claim claculations

Claim thesis and Job applications costs

Application costs are also claimable each time you apply for an Internship, a thesis or a Full time Job you can claim the application fees. If you send these application through regular mail you can claim upto 8.5€ per application and upto 2€ per Email.

Are relocations cost also claimable in Germany?

As Students, relocation to a new city for internships or thesis is very often done. Such relocations are also claimable upto 820€ for singles and 1640€ for Partnered couples.

Then there are also Telephone and Internet cost, which can be a maximum of 240€ per year and bank management cost of 16€ per year. But with these 2 costs there are very low chances of acceptance.

Claim travel costs to Germany from Home country

There are certain costs which might be claimable but the probability of these claims being accepted are very low. These include:

• The travel costs of moving to Germany so this can include your Visa Fees and The flight ticket to Germany.
• One trip home per calendar year, with this claim I was not able to find any new information as all of the informations is pretty old and this may not be claimable any more.

Is proof Required while making a tax claim in Germany?

An important thing is to keep proof of things whenever possible, this will help you manage expenses and help you later on when you are applying for a tax return. You can claim many things and often the Tax office does not require proof but in case the tax office asks you for proof you are not legally required to provide that proof. So in that case if there is no proof given, the tax office will simply ignore that specific claim.

Remember that You need to pay taxes in order to get a return. Many students actually do not earn a lot during their studies, so they cannot claim every thing. So here Verlustvortrag is generated, this is a claim that you can carry forward to next years. As a student you can carry this forward up to 7 years so that you can claim all your study costs when you have paid enough taxes.

If you want to submit a tax return, I share the step by step process of filing a Tax Return in Germany in this video!

Now There are other taxes which you need to be aware of for example Taxes on Stocks and ETFs, which is what we will discuss next.

How to Invest in Stocks and ETFs as a Student in Germany

As a Student in Germany you are allowed to invest in Stocks and ETFs even if you are a NON EU Student.

Most students think that you need a fulltime job before you can get started with investing in the stock market, but that is not True. You can get started with as Low as 10€. The hardest part of starting to invest is beginning to think of yourself as an investor, and actually starting the process itself.

As a student, money is usually very scarce but here we want to build a habit of Investing consistently as this is a long term game and the earlier you start the better.

Why you should start investing in Stocks as a Student in Germany

If you just invest 50€ in the stock market every month rather than keeping it in the bank, in 10 years you can have 8230€ instead of 6000€ . This is based on an average yearly return of 7% based on the return from the S&P500 Index.

If you keep on investing this 50€ per month for 40 years you can have 133 thousand euros instead of 24 Thousand.

As you can see in the graph, there is an exponential curve that is why I said that it’s a long term game and the earlier you start the better. Alright now that you are motivated let’s start with the exact procedure.

Best Depot (broker) Account for student in Germany

To start investing in Stocks and ETFs you need a brokerage account. You can open a Broker account with a traditional bank in Germany like with Deutsche Bank, Post Bank or Comdirect. With these banks there is less freedom with those bank in addition to higher fees.

A new type of Brokers also known as Neo-brokers are getting popular due to their ease of getting started and very low to no fees associated with them.

My three favourites are eToro, Scalable Capital and Trade Republic.

As a beginner I highly recommend that you open an account with eToro as it has a Virtual money account. Using this virtual account you can spend 100 Thousand Virtual Dollars to buy stocks and Crypto. You can register and play around with the fake money to get an Idea on how the stock market works without even investing a single euro.

And if you open an account with Trade Republic with my link you can get a Free stock upto 200€ so that can be a great motivator to get started.

Ok now you know where you can buy stocks lets get into how I would go about investing.

Investing Strategy for students in Germany

If I was a complete beginner I would open an account with eToro and test out the platform for a few days then I would open an account with Trade Republic or Scalable capital and create a savings plan for an ETF, Like the Core MSCI world .

If you are wondering what is an ETF: well, basically An ETFs is a bundle of stocks you can buy together. A savings plan buys a small portion of the ETF, in case of the Core MSCI world it is a collection of more than 1500 different companies. So essentially I would be buying a very small part of all of these 1500 companies. Then I would look into other kinds of ETFs. Only after getting some knowledge about how investing in the stock market works would I invest in Individual Stocks.

Taxes on Stocks in Germany

In Germany there is a flat capital gains tax on any profit that one gains from selling stocks and ETFs and that is 26.75% . So for example if someone buys a stock at 100 Euros and sells that stock for 200 Euros they will have to pay a tax of 26.75 Euros as the tax is calculated on the profit.

Tax Free Profit on Stocks

There is however an 801euro tax free amount per year for singles and 1602 Euros tax free amount for couples. So as a single one can have 801 Euros tax free profit per year.

Risks with investing

A very important thing to consider is the risks involved in investing in the stock market . The values for stocks go up and down, market crashes also come for example in the past 2 months my Portfolio has dropped more than 15%. So for students it is very important that only the money which is not needed is invested. Maybe 25 Euros a month could be a great starting point to learn how the stock market works. This would lay down a great foundation for when you get a full time job and have more money to save and invest.

How to Invest in Cryptocurrency as a Student in Germany

We all want to get rich, and we want to get rich Yesterday! And when we see headline like this, most of us want to put all of our savings in a Meme Coin and Ride it to the moon! I want you to have the exact opposite reaction to this after I tell you that As a Student in Germany you are allowed to invest in Crypto even if you are a NON EU Student.

Are international students allowed to buy crypto in Germany?

Yes, Students are allowed to buy, trade and even stake Crypto tokens if they use their own money to invest and trade crypto.

How to buy crypto in Germany

To get started with Crypto investing or Trading you need to open an account with a Crypto exchange. The issue here is that it can be very overwhelming if you look at a crypto exchange there are so many coins and so many tokens.

There are many dedicated crypto exchanges out there for example Binance and Coinbase but you can use eToro, Scalable Capital and Trade Republic to invest in certain cryptocurrencies as well. That said there are some limitations with these 3 apps as there are not conventional crypto exchanges.

You can easily open an account with Binance and Coinbase within a couple of minutes and buy your first crypto using a credit card or your debit card. With eToro you have an option of using Paypal as well but if you want to buy crypto with eToro I highly recommend that you watch this video first.

In Germany you do not need special permission from anyone to Trade crypto using your own money, as long as you are not doing this professionally meaning that you are not sacrificing the time you need to complete your studies. Now it is impossible to determine if you are sacrificing your study time in favor of Trading but a general example would be extending your Study period unnecessarily (not legal advice :P).

What to avoid when investing in Crypto

When we look at crypto most of us want to get rich quick, so investing in Microcap tokens seems to be the obvious choice.

Lets look at Dogecoin for example if you had just bought 100$ worth Dogecoin in January 2021 in just 4 months in may 2021 you could gained a profit of 6800%. But that is just one half of the story. If you had bought 100$ worth in May 2021, today it would be worth just 24$.

I wanted to give an example of Dogecoin because as a Student I want you to be extra careful about how you invest your money. Moonshots are possible but for an overwhelmingly large number of you this is not going to be a reality. Here you need to be very sensible and invest responsibly. You can obviously do what ever you want to with your own money. But I implore you to have a sensible approach.

Crypto taxes in Germany

If you hold your cryptocurrency for at least 1 year and sell it afterwards there is going to be 0% tax on it. For example if you bought 100euros worth Bitcoin on 1st March 2022 and sold it on 2nd March 2023 for 300 Euros there will be absolutely no tax on it. But if you sell crypto before 1 year it is going to be taxed based on your variable income tax rate. You will have to submit an income tax return and declare that profit. In the event that your profit was less than 600€, it will not be taxed and you do not have to submit a tax return because of this profit.

As a Student you can either choose to spend all your time on traveling and money buying unnecessary gadgets or Learn to take control of your own finances and find a balance between spending and saving. I hope you choose the later as your financial decisions today can have real consequences in the future.