Here's Why America Is Better Than Europe at Investing

Image source: Getty Images

A frequent topic of discussion among Americans who have traveled in Europe is: "which is better -- America or Europe?" Many Americans love to visit Europe's historic cities with cobblestone streets, picturesque sidewalk cafes and efficient public transit systems. Life in Europe can feel deliciously laid back, with good food and well-tended public spaces right at your doorstep.

But for many people, America might be a better place than Europe to be an investor. Despite Europe's distinctive quality of life, America could be a better place than Europe to build a career, buy stocks , and build wealth.

Let's look at some impressions of economic life in Europe vs. America, and which place might be best for your career and your retirement savings.

Europe vs. America: Big differences in money and lifestyle

It's hard to generalize about the lives and future prospects of a combined 785 million people (the European Union has a population of 448 million, and America has 337 million). Europe and America represent two vast continents containing many different cultures, geographies, languages, perspectives, and personal experiences.

But here are my impressions as an American who has traveled to Europe 10 times in the past 24 years.

America tends to be economically richer than Europe, but also riskier

Americans tend to have bigger houses, bigger cars, and more materially abundant, consumer-oriented lifestyles than Europeans. Think of all those fast food drive-thrus, weekend shopping mall trips, and Costco runs. Europeans tend to have smaller homes but longer vacations and more leisurely lifestyles.

Europe might be less dynamic than America, but more relaxed

In Europe, it's easier to walk to a nearby grocery store and buy fresh, local ingredients to prepare a healthy home-cooked meal in your small-but-tidy and elegantly equipped European kitchen. Meanwhile, time-starved Americans get stuck in traffic on their way home from a long day at work, and end up ordering from food delivery apps instead.

Europe has a better social safety net than America

Europe tends to have more generous public pensions and unemployment benefits, longer life expectancy (the average European Union resident lives for 81.5 years, while Americans live 77.5 years), and lower-cost universal health insurance.

Some of the big expenses and financial risks of life that Americans worry about and work hard to pay for (child care, elder care, out-of-pocket healthcare costs) are less of a burden in Europe.

But there are trade-offs to be made in these two different approaches to life. The riskiness and bustle and sprawl of American economic life might also be making Americans richer than Europeans.

Europe vs. America: Who is getting richer?

Recent data cited by Chris Bryant, Bloomberg Opinion columnist, show a few signs that America's economy might be getting (and staying) stronger and richer than Europe:

• America's economy is bigger: America's gross domestic product (GDP) per person is about 30% larger than the Euro area (the nations of the European Union that use the Euro as currency)
• Americans work more hours: The average American (age 15-64) works 1,291 hours per year, compared to 1,031 hours for Germans, 1,030 hours for French people, and 1,019 hours for Italians.
• Americans make more money: America's average annual wages and salary (as of 2022) was $77,500. That means Americans tend to get paid a lot more than people in Germany ($58,900), the United Kingdom ($54,000), France ($52,800), Sweden ($50,400), Italy ($44,900), and Spain ($42,900).
• One-third of U.S. households now earn more than $100,000 per year: We could be reaching a point where the top 33% of American earners are twice as rich as the average European.

It's hard to make an apples-to-apples comparison of who makes more money: Americans or Europeans. Each country and specific location has different costs of living, like taxes and health insurance. But perhaps the biggest difference in economic life between America and Europe is how people invest their money.

Who invests more: America vs. Europe

America has become a middle-class investor society, where 58% of people own stocks (more than ever before). Many Americans invest every payday with 401(k) plans. Europeans are less likely to own stocks and more likely to hoard cash.

Here are a few stats mentioned in Bloomberg by Chris Bryant that show why America is outpacing Europe in investing:

• American stocks are worth more than European companies: Back in 2009, the Stoxx 600 index (Europe's equivalent to the S&P 500) was worth about the same as the S&P 500. Today, the S&P 500 index is worth about 3.3 times more than the Stoxx 600.
• Europeans hold too much cash: Americans keep about 13% (on average) of their household assets in cash, such as bank savings accounts . But people in the European Union keep an average of 34% of their assets in cash, and Germans are even more risk-averse, holding an average of 43% of their assets in cash. Even the current German Chancellor, Olaf Scholz, said in 2019 that he keeps all his money in a low-yield bank account.
• America has 23 million millionaires: Compared to only 3 million millionaires in Germany, 3 million in France, and 3 million in the United Kingdom.

Bottom line

There are so many aspects of life in Europe that are beautiful, comfortable, and enticing. But I also love my American life and career. Taking risks, being creative, and trying to shape the future is all part of the "American Dream" -- and it shows in how Americans invest.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy .