The Financial Freedom Report by the Lebensversicherung von 1871 a.G. München (LV 1871) in collaboration with the opinion and market research institute Civey sheds light on the attitude towards financial independence in Germany for the fourth consecutive year. This year, there is a clear influence of socio-political factors on financial issues, which also affects the mood in the country and causes the Financial Freedom Index to decrease for the first time. The Gen Z faces special challenges. In 2024, fundamental values of democracy such as freedom of speech (83 percent), self-determination (79.5 percent), freedom of movement (68.5 percent), and free elections (66.1 percent) shape the general understanding of freedom and have increased compared to the previous year. Financial independence follows these values this year at 59.6 percent; in 2023 it was 62.8 percent. „The results do not come as a surprise given the current political debate on the threat to democracy,“ commented Prof. Dr. Julia Pitters, Professor of Economic Psychology with a focus on financial psychology at the International University, who scientifically accompanied the Financial Freedom Report 2024. „Financial freedom is a central building block for a self-determined life. It not only includes having sufficient financial resources but also the ability to make informed decisions that enable long-term security and prosperity.“
Negative emotions lead to a negative spiral. When it comes to private finances, half of Germans (50.3 percent) experience negative emotions. In contrast, only a third (29.5 percent) look positively and another 20.2 percent neutrally at their accounts. „Negative emotions, especially worries and fears about the future, can have a counterproductive effect on financial planning. A paralyzing attitude can easily lead to a self-fulfilling prophecy. For example, if investments are not made with foresight, it can lead to financial losses and further fuel fears,“ explains Prof. Dr. Julia Pitters the phenomenon of the negative spiral.
The state of financial normality is not enough. For the first time, the index has decreased compared to the previous year from 44.8 percent (2023) to 41.6 percent. The index, collected since 2022, has always been in the „Normality“ range. Financial normality describes a state that is still associated with existential dangers once the source of income dries up. „It can be assumed that due to the current external circumstances, people are doing less or not enough for their financial stability or have not yet dealt with the issue sufficiently to reach the next level, namely control over their own finances,“ says LV 1871 board member Hermann Schrögenauer.
The Financial Freedom Index paints a picture of the current situation in Germany based on the importance of finances in the context of freedom, along with the satisfaction and relaxation level of the respondents. It distinguishes between the stages of „Chaos“ (0 to 20 percent), „Normality“ (20 to 50 percent), „Control“ (50 to 80 percent), and „Freedom“ (80 to 100 percent) on a scale of 0 to 100 percent.
Gen Z: Fulfilling dreams with financial freedom. In general, people in Germany equate financial freedom with financial independence in all aspects of life (59.2 percent). This is followed by the aspects of not having to work anymore (12.7 percent), fulfilling financial dreams (10.7 percent), and the desire for an early retirement (5.3 percent). In a generational comparison, the results are more nuanced. The 18 to 29-year-olds, the so-called Gen Z, are significantly above the average at 20.7 percent in understanding financial freedom as fulfilling financial dreams. However, they represent the lowest value at 40.7 percent in wanting to be financially independent in all aspects of life. In contrast, the satisfaction with their own financial situation and the actions of Gen Z are the highest age group that is the most dissatisfied with their finances (44.8 percent).
„Unlike in the past, wish fulfillment plays a much more important role for young people today, even before they consider financing. On the other hand, the idea of only being able to afford what one can pay for is much more deeply rooted in older generations,“ explains Prof. Dr. Julia Pitters. „Given the growing financial gap in state pensions and issues such as recession and inflation, the response must be appropriate long-term financial planning. The earlier, the better. And: The more professional, the more meaningful,“ summarizes Hermann Schrögenauer.
LV 1871 Financial Freedom Report 2024. The Financial Freedom Report 2024 surveyed 2,500 German citizens aged 18 and over in August of this year. LV 1871 has, for the fourth year in a row, examined the relationship between freedom and finances in general and especially the impact on financial provision and security. Participants answered questions about their individual understanding of (financial) freedom, desired retirement age, and support for financial planning.