Finally of legal age! If you leave your parents’ home to study or work, you need a lot of money for the move and the first few months. Pocket money is rarely enough for this. So that the children do not have to start from scratch, parents and grandparents often save for this moment for years. When the little ones grow up, they start their new life with a few thousand euros. But how do parents and grandparents best invest the savings? The most important questions at a glance:
What name should the savings account be in?
The answer to this question is easy for consumer advocate Niels Nauhauser: “If the money is to be for the child, then the account should also be in their name,” explains the financial expert at the Baden-Württemberg consumer center. If the account goes to the parents, the money belongs to them and the child has no claim to the savings. So if the parents die prematurely, the money goes into the inheritance and is taxed.
When will the child be able to access the account?
The parents or grandparents manage the account up to their 18th birthday. Only then can the children freely use their account. If you are worried that your youngsters will spend their savings in one fell swoop, you can set up a payout plan shortly before their 18th birthday. The child then receives a certain amount every month until the account is empty. The payout plan can usually only be canceled if both parties agree – there is usually a fee for this. Financial expert Nauhauser therefore advises making this decision dependent on the individual case: “If the child moves to another city to study, it needs a lot of money all at once and not a monthly payment.”
Is training insurance worth it?
Some insurers advertise with a training insurance, which is supposed to protect the youngsters financially. Behind it is a mixture of endowment and term life insurance: “The name is misleading, because the insurance of course does not pay for training,” explains consumer advocate Nauhauser. It only covers risks such as the death of the parents on a smaller scale and otherwise pays the children what the parents have paid in. In addition, such insurance is often expensive and hardly generates any returns. The financial expert therefore advises: “The topics of insurance and investments should always be kept separate.”
What about ETF or fund savings plans?
Parents can also take out savings plans that are linked to a fund or an exchange-traded index fund (ETF) in the child’s name. Consumer advocate Nauhauser advises against a visit to the house bank: “Direct banks usually have better and cheaper offers than branch banks and a larger selection.” The higher the costs, the lower the return: If you have to pay two percent annual fees for fund management, you stay only half of the four percent return is left.
Is the classic savings account worth it?
Despite the low interest rates, the days of the savings account are not over yet, says consumer advocate Nauhauser: “There is still some interest on children’s savings books – in contrast to products for adults.” The reason is simple: children get into the savings account Usually the first time in contact with a bank. If they regularly bring their piggy bank over to the company, it binds the youngsters as customers for lucrative contracts at the start of their careers – that’s the hope of the banks, says Nauhauser. The savings book has another advantage: by regularly saving, the youngsters get used to dealing with money. This reduces the risk that, as an adult, he will spend everything at once.