Strong economic data, high employment, stable wages. On paper, the financial situation of many households looks solid. In reality, it often feels very different. More and more people work full-time, earn decent money, and still struggle to get ahead. Savings are missing. Financial flexibility is shrinking. The fear of no longer being able to maintain one’s standard of living is growing.
The causes are rarely rooted in individual behavior. They lie in the system. Rising rents, higher energy costs, and persistently elevated inflation have significantly eroded purchasing power. Fixed expenses consume an ever-larger share of income. At the same time, wealth accumulation stalls, even where money flows in regularly. Work secures the month, but no longer automatically secures the future.
The key question is therefore no longer how much someone earns, but how stable the financial structure behind that income really is. This shift marks a fundamental change in how financial security must be understood in modern economies.
The key question is therefore no longer how much someone earns, but how stable the financial structure behind that income really is. This shift marks a fundamental change in how financial security must be understood in modern economies.
1. Why a Stable Income Is Often No Longer Enough
A stable income loses its protective effect when prices, rents, and fixed costs rise faster than wages. What was once considered solid often now covers little more than day-to-day consumption. Financial leeway is scarce. Savings even more so.
Inflation acts like a slow, continuous deduction from income. Rent, energy, food, and services have become noticeably more expensive in recent years, while wages have often increased only moderately. According to preliminary data, Germany’s official inflation rate in November 2025 stood at around 2.3 percent year on year, stable compared with October and only slightly below September’s figure. At the same time, core inflation, excluding food and energy, remained higher at about 2.7 percent, indicating that services and other consumer expenses in particular continued to rise significantly.
There is also a structural shift. While income flows monthly, assets are built over the long term. This is where the gap emerges. Many households manage to cover their ongoing expenses, but fail to build wealth systematically. Work finances everyday life, but it does not cushion crises when illness, job changes, or economic downturns occur.
The result is a new form of financial vulnerability. It affects not only low-income earners, but increasingly also people with seemingly secure jobs.
2. What Does “Working Poverty” Mean in Germany in Concrete Terms?
Working poverty refers to people who are employed but whose income is not sufficient to live in long-term financial stability. It is not about unemployment, but about a structural imbalance between income, living costs, and the lack of savings.
In concrete terms, this means:
- The income is below or only slightly above the poverty line.
- A large share of earnings goes toward fixed costs such as rent, energy, and mobility.
- There are no financial reserves to absorb unexpected expenses.
- The financial room for retirement planning or wealth building is minimal or nonexistent.
This financial predicament is increasingly common among various groups, including skilled workers, single parents, those with inconsistent self-employment income, and part-time staff. The key factor is not the specific job title, but rather the underlying financial arrangement.
What is striking is that working poverty is often invisible. Those affected have regular jobs, pay their bills, and are statistically considered “employed.” At the same time, they live financially from month to month. Work secures status, but not stability.
3. How Many People Are at Risk of Poverty Despite Having an Income?
Poverty in Germany is no longer a marginal phenomenon, and it is increasingly detached from unemployment. A significant share of those affected are working or have worked for decades.
Key findings from the Distribution Report by the Economic and Social Science Institute (WSI) of the Hans Böckler Foundation:
- Almost two thirds of adults at risk of poverty in Germany are employed or retired.
- Even before the recent wave of inflation, more than 40 percent of people living in poverty had no financial reserves at all.
- The situation is strained even above the poverty line. More than half of the lower income half and around 47 percent of the upper middle class fear they will not be able to maintain their standard of living in the future.
- Since 2010, the group of people living in poverty has not only grown in size but has also moved further away from the societal middle in relative terms.
The middle class, once considered a financial safety net, is losing stability. Rising living costs, uncertain retirement prospects, and a lack of savings mean that even households with regular incomes remain financially vulnerable.
4. What Role Does the Lack of Financial Education Play?
Money is everywhere. Knowledge about it is not. Many people make financial decisions every day without ever having learned how those decisions work or what their long-term effects are. This gap between financial reality and financial understanding amplifies every other structural problem.
What is typical is less a lack of knowledge and more a sense of uncertainty:
- Income and expenses are managed, but not planned.
- Decisions are made situationally, not strategically.
- Saving happens, but investing remains abstract or is postponed.
This has consequences. Anyone without a clear financial framework reacts to pressure with restriction or consumption rather than with structure. Small amounts feel harmless, but they add up. Long-term planning seems complex, while short-term needs feel tangible.
At the same time, many people lack access to understandable, neutral information. Financial topics are seen as complicated or risky. The result is hesitation. Money stays in checking accounts, loses purchasing power, or is not set aside at all. The lack of financial education thus becomes a structural problem.
5. Why Does Social Comparison Intensify Financial Problems?
Financial pressure stems not just from objective numbers, but from how we perceive our situation. The tendency to constantly compare ourselves with others adds significant stress, with visible consumption setting the standard. This quickly leads to a shift where what was once seen as merely possible begins to feel like an absolute necessity.
- Living standards adjust upward, often gradually.
- Subscriptions, travel, and branded products become part of everyday life.
- Digital comparison spaces reinforce the feeling of falling behind.
The effect is well known. As income rises, expenses rise with it. The financial gap remains the same, even though more money is earned. What creates a sense of belonging in the short term weakens stability in the long term.
The American comedian and social critic George Carlin once summed up this pattern:
“People buy things they don’t need to impress people they don’t like.”
This creates a cycle. Consumption relieves insecurity, but at the same time reinforces it. And it makes exactly what would enable financial independence more difficult: building reserves and structure.
6. Why Is Work Alone No Longer a Safety Net?
A regular income provides stability in everyday life. For long-term security, it is often no longer sufficient. This is less about a lack of effort and more about changed conditions.
Several factors come together:
Income primarily covers fixed costs.
Rent, energy, insurance, and mobility consume a large share of earnings. What remains is tightly limited.
Savings are missing as a buffer.
Without reserves, any disruption becomes a risk, whether due to illness, a job change, or family-related strain.
Social security offers only limited protection.
Public systems do not cover every income gap and rarely replace the previous standard of living.
Inflation has a lasting effect.
Even stable salaries lose real value when prices rise faster than incomes.
The result is fragile stability. As long as everything functions, income holds things together. Once something falls out of balance, the safety net is missing. Work secures the month, but not automatically the future. That is the defining financial paradox of our time.
7. What Does Financial Security Really Mean Today?
Financial security is often confused with income. Anyone who gets paid every month is considered secure. But this equation is becoming less and less valid. In practice, security shows up in different ways.
- How long could I manage without income?
- How severely would a loss of income affect me financially?
- Am I able to make decisions without having to calculate every euro immediately?
For many people, the honest answer is: only to a very limited extent. Income covers ongoing needs, nothing more. There is no margin for error, no resilience against disruption. Security exists only as long as nothing unexpected happens. If income disappears or costs continue to rise, the balance tips quickly.
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8. How Can Old-Age Poverty Be Prevented?
Old-age poverty rarely appears suddenly. It is usually the result of many years without sufficient wealth accumulation. Income flows in, obligations are met, but little structured preparation is made for later life.
The problem is not that people do nothing. The problem is that they do not build systems. Prevention therefore does not start with individual products, but with a simple principle. Income must be translated into substance. Anyone who wants to plan for the long term needs systems that function independently of day-to-day events.
- Regular saving and investment routines, for example through long-term ETF savings plans
- Reserves that prevent retirement provision from being dissolved in every crisis
- Supplementary forms of investment that do not depend exclusively on wages or state benefits
How large the gap still is becomes clear when looking at investment behavior. Although Germany is now the largest ETF market in Europe, participation starts late and is unevenly distributed. Since 2022, the number of ETF investors has increased by around 5.3 million people, a rise of 58 percent. Even so, only a minority of the population invests in capital markets at all. The age structure is also striking. Around 35 percent of ETF investors are under 35 years old. This suggests that financial planning is mainly reaching younger people, while many working adults start investing late or not at all.
In this context, market-external approaches are also being discussed, where returns are not directly tied to stock market movements. Litigation funding is considered one possible diversification component, as outcomes arise from individual legal cases rather than price fluctuations. What ultimately matters, however, is not the instrument itself, but the logic behind it.
9. Why Is Litigation Funding Gaining Importance as an Investment?
Litigation funding is increasingly attracting the attention of investors primarily because it follows a different principle than traditional asset classes. Returns are not generated through price movements, interest rates, or market cycles, but through the outcomes of specific legal cases.
Litigation funding is increasingly attractive as a complementary asset within a broader investment strategy, rather than a replacement for existing holdings. This appeal is heightened in an environment marked by high correlations among many asset classes, coupled with rising interest rates, volatile equity markets, and mounting geopolitical risks, all of which underscore the growing need for diversification.
