Daily allowance account for children – an alternative to a savings book
We’ll help you choose the right child benefit account. When it came to saving money for children, the savings book used to be considered the ultimate. But in the meantime, interest rates on the savings book have almost gone bottomless. As an alternative to the savings book, call money is an option. Below we explain what parents should pay attention to if they want to open a child benefit account.
Security with the call money account for children
Gifts for birth, baptism or communion. Christmas gifts from grandparents and other relatives or saved pocket money. There can be a lot of money for the children. But where to put all the money? Parents naturally want a safe form of investment for their children’s savings. That’s why the savings book used to be so popular as an investment for children. But nowadays, a savings book pays almost no interest. That’s why most savers are looking for one Alternative to the savings book. A sensible alternative to the savings book is a Child benefit account, because it offers the same security as a passbook. Because in the event of bankruptcy, the money in the overnight deposit account is secured by the statutory deposit insurance up to a total of EUR 100,000.
The statutory deposit guarantee does not only apply to banks in Germany, but to all banks in the euro area. With our comparison calculator, you can choose whether you want to display overnight money offers from banks from all over the Eurozone or limit the search to banks from Germany. The banks from Germany generally offer additional security for overnight money through membership in the deposit guarantee fund of the Federal Association of German Banks. For example, overnight deposits at Consorsbank are secured by the deposit guarantee fund up to a total of EUR 120 million per customer. Therefore, parents do not have to be afraid that their child’s savings will be lost if the bank goes bankrupt. Price losses such as those known from shares, for example, are not possible with a call money investment. The paid-in money is therefore retained in any case.
Call money interest higher than with the savings book
The overnight allowance account for children offers several advantages over the classic savings book with the same level of security. For example, there is a significantly higher interest rate on overnight money than on savings accounts. Of course, the call interest rates are currently rather at a low level. Unfortunately, this currently applies to all safe savings investments. The reason for this is the interest rate policy of the European Central Bank with a key interest rate at a record low. It is therefore all the more important to compare the offers of the banks exactly in order to find a call money account with the highest possible interest. We provide you with a comparison calculator free of charge.
However, please note that the overnight interest rates advertised by the banks only apply to new customers and only for a limited period of time, for example four months or six months as with Consorsbank. After that, the interest rate for existing customers is automatically changed, which is usually quite a bit below the new customer rate. For better comparability of the overnight money offers, our comparison calculator shows you not only the interest rate (yield) in percent but also the actual income in euros over the selected term. All you have to do is select the desired investment amount and the investment duration. Of course, you can change both the investment amount and the investment duration at any time after opening the account.
Differences in the frequency of interest credits
There are differences between the banks not only in the amount of overnight interest, but also in the frequency of the interest credits. While many banks only credit overnight interest once a year, there are also banks where overnight interest is credited quarterly or even monthly. If the interest is credited several times a year, this has the advantage for the saver that he can benefit more from the compound interest effect. The compound interest effect arises from the fact that interest is also paid for the interest already credited.
Savings are available at any time with a call deposit
Another advantage of overnight accounts is that this is an extremely flexible form of investment. The money deposited in a call money account is available in any amount at any time. If your child needs part of his savings for a larger purchase, for example for a trip or a driver’s license, he can access all of his savings at any time without restrictions. However, it is of course also possible to withdraw only part of the money invested from the account and further save the remaining amount.
For comparison: the savings book can only withdraw a maximum of 2,000 euros per month. Anyone wishing to withdraw a higher amount from the savings book must either cancel three months in advance or pay interest on advance. In the case of overnight money, however, no fees have to be paid, and no notice period has to be observed for overnight money, regardless of how much money is to be withdrawn from the account. This makes the call money account for children the more flexible alternative to the savings book.
In the opposite case, you can of course also deposit additional money into the call money account at any time, for example if the child received money as a gift for Christmas or a birthday. There is no minimum investment amount for the overnight deposit account. However, some banks lower the overnight interest rates when the investment amounts are very high. Before you open a call money account for your child, you should therefore take a close look at the conditions of the bank.
No flat-rate withholding tax thanks to the saver’s lump sum and basic allowance
Parents who want to open a call money account for their child naturally also ask whether taxes have to be paid on this investment. In Germany, interest on a call money deposit is normally subject to withholding tax at a fixed tax rate of 25%. Added to this are the solidarity surcharge and the church tax. However, the interest income of the children is usually spared taxation. This has to do with the fact that high allowances can be used in a child allowance account. Firstly, the saver’s lump sum amounting to 801 euros. This exemption for investment income is therefore fully available to all citizens, including minors. However, the saver’s lump sum is not automatically taken into account, but an exemption order from the parents must first be set up at the bank so that the bank does not withhold any withholding tax.
Children who have no other income can, in addition to the saver’s lump sum, also claim the full amount of the basic allowance for interest income. The basic allowance was increased to 8,820 euros in 2016. The table below shows how the basic allowance has developed over the past five years.
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