In the sleepy, picturesque towns and villages of south-west Germany, the paragons of thrift are doing what they do best. They shop frugally, use credit cards rarely and save up to a third of a property's value before applying for a mortgage.

The schwäbische Hausfrau – southern Germany's thrifty Swabian housewife – is frequently invoked by Angela Merkel. The German chancellor argues that Europe has been living beyond its means and can learn from these women's frugal housekeeping and balanced budgeting.

Heide Sickinger and Waltraud Maier, two housewives from Gerlingen, near Stuttgart, agree. "A housewife keeps the family together and the money," says Maier. "I don't buy on credit. People never used to live beyond their means here," she adds, before noting that the younger generation are more cavalier. She and her friend only use credit cards when they go on holiday, and make sure they have enough money in their accounts to pay off the debt immediately. Both believe that "southern Europeans are a different breed. They are more easy-going".

The two women say that they only tend to buy what they really need (with the exception of a flatscreen TV). Even a wardrobe counts as a luxury purchase – because Swabians don't buy cheap. They value quality, which means a wardrobe has to be solid wood, so it lasts a lifetime.

Similarly, the two women buy their food at the butcher's, local farms and markets, rather than at discount supermarkets such as Aldi and Lidl. "The quality is better," says Maier, "and you can buy two carrots rather than a whole kilogramme." She never throws anything away – old bread is made into bread dumplings, for example. Many people in this rural area grow their own fruit and vegetables, and bottle or pickle them.

This outlook is informed by a national psyche profoundly shaped by the experience of the Weimar republic's debt mountain and hyperinflation in the 1920s, when people pushed carts overflowing with banknotes through the streets.

You won't find any luxury boutiques in Gerlingen. Nonetheless, its 20,000 inhabitants have more purchasing power – an estimated €500m (£400m) a year – than any other town in Baden-Württemberg. Even the nearby state capital, Stuttgart, doesn't have many luxury shops. Compare that with Munich's Theatinerstrasse, which is lined with international brands such as Dolce & Gabbana, Armani and Swarovski.

"Bavarians live the baroque life," says Angela Schmid, head of the German housewife association's Württemberg branch. "Swabians do buy luxury clothes and other goods, but they don't like to show off. You might see a Swabian housewife enter a luxury boutique who is dressed like her cleaner. You won't see amazing hats in the street either or jewellery – people only show them to each other in private."

Swabians even have an expression for this – hälinge reich, which means "secretly rich".

Catharina Raible, director of the Gerlingen town museum, says that when Swabians do splash out on something like a fur coat, they wear the fur on the inside. "Not outside – so you don't see it."

She recounts that Robert Bosch, the founder of the electronics company, whose family still lives in Gerlingen, used to wear a thick loden coat with an inside fur lining: "a typical Swabian". Despite the family's wealth, the children wore clothes that had been mended. Sickinger says: "You learn how to save from the rich."

Gerlingen is wealthy because many Bosch managers live there – the company has its headquarters in the town – and its hillside homes are popular with those working in Stuttgart, which is a 25-minute commuter train ride away. Baden-Württemberg's former prime minister, Lothar Späth, also lives in Gerlingen.

Both Sickinger and Maier drive Mercedes cars, but Sickinger recalls that she and her husband drove battered old cars until her father-in-law died. That's when they bought a one-year-old Mercedes. Her mother-in-law said at the time: "Grandpa would never have bought a car, but a field." Maier chips in: "People never sold any land. The older generation were far more thrifty than us."

Southern Germany's frugality has its roots in the 19th century, when the area was very poor. Another influence was Pietism, a movement within Lutheranism that emphasised hard work and shunned worldly amusements.

The Swabian saying Schaffe, schaffe, Häusle baue – which translates as "work and work to build a house" – also dates back to that time. "You feel guilty when you're not working," says Sickinger. Swabians typically buy or build their own homes in their late 20s to early 30s, and they also start saving for retirement from a young age.

Mortgages are traditionally provided by building societies in Germany and the rule of thumb has been for people to save a third of the purchase price and to borrow at fixed mortgages for up to 25 years. Unlike in the UK, where people usually upgrade to bigger homes as soon as they can afford to, a house is bought or built for life.

German families are squirrelling away almost twice as much as UK households, according to a Lloyds TSB report this year. The typical German household has £8,609 in savings and investments, against £5,009 in the UK.

The chunk of their incomes that Germans put into savings, investments and pensions has been stable at 10% in recent years, while Britain's savings ratio was on a downward trend until the recession and has since risen to around 7%.

Swabians lead the way when it comes to saving in Germany. "Baden-Württemberg has a lot of industry, so people are budgeting on a secure basis – it's not pure misery," says Schmid. Today the south is Germany's wealthiest region.

Deutscher Hausfrauenbund, the German housewife association that she works for, offers courses in how to run a household, from practical skills to teaching young people how to budget. It also offers a "master housewife" qualification for the more ambitious. This used to be a badly paid job but that is changing now. Hospitals, old people's homes and rehabilitation centres increasingly need people with those qualifications, under a federal German law that was passed five years ago. Other master housewives run organic food shops.

Gerlingen, for its part, offers housewife tours of the town, which are very popular – the guide Diana Schneider dresses up as a schwäbische Hausfrau, complete with overall, apron and broom.

"I'm Erna Schwätzele – she knows how to clean and work and keep the money together. Nothing comes from nothing."