Financial investment for children pacifiers, school bags and savings plan
If a deposit or account is in the child’s name, parents have one advantage: they save taxes. Although underage, children are classified as full taxpayers. This also means that the child is granted his own saver’s lump sum and a basic allowance.
These are currently at 801 and 8004 euros. If the tax breaks on your own savings have been exhausted, this can be a motivation to invest money in the name of the child. However, opening such a custody account is complex: custody must be clarified without any doubt, and the parents’ birth and marriage certificates must be shown. Difficulties can arise if the parents have different surnames.
Tax return 2011: How children help save taxes
In addition, it may be that parents have to buy the tax benefits elsewhere at a high price: If the child’s income in the current year exceeds 375 euros per month – minus the saver lump sum amount of 3699 euros per year – the child may not free be insured with his parents.
The following principle also applies: a gift is a gift. Investments in the name of the child are considered a gift. Parents can manage the assets, but only in the interests of the child, for example for their education.
Using the child account to park your own money is not a good idea. If the tax office notices this, it can happen that parents have to pay the saved taxes and penalty later.
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8 comments on "Financial investment for children: pacifier, school bag and savings plan"
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We have created a free custody account for the junior and use a free (only DB Xtracker ETF, only until 2015) savings plan on a global dividend ETF and an emerging market dividend ETF.
So you are flexible, you can adjust the monthly savings rate and the respective fund / ETF at any time as you want.
Everything else is nonsense.
Children have the entire allowance at their disposal and therefore do not pay any withholding taxes on the dividends.
If you dissolve the portfolio after 15+ years, the child will hardly achieve more than the basic allowance of around 8,000 euros in profit.
(For tax optimizers you can of course realize profits over the years (then 8000 per year) and then pay NO final tax at the end)
[I assume children have normal earnings. ]
A beautiful Sunday.
In any case, it is not advisable to use Riesters. Riestern means not only saving taxes and collecting pensions, but also liabilities for decades. The money is then missing elsewhere. A child and a young person has so much going on that it is nonsense that he should take care of his retirement today. The money in the Riester contract is then missing, for example, during the training phase. As a result, you need an even higher educational loan. Then you stutter a loan with 5% interest, while financial assets in the Riester contract acidify with 2% interest.
And whether the tax benefits also apply in five, ten or twenty years, let’s say. This year, the German tax authorities made a long nose of all those who had invested in film funds. For years this was a common and legal tax saving model. And without a law being changed, the profits from it were no longer tax-free. And the tax office victims were even allowed to tax the profits of recent years + interest.
Riester falls flat simply because it is a tax-saving model. A tax saving model is a deal with the state and a deal with the state is a pact with the devil, if not worse.
A good return must be. So real assets such as shares, real estate or equity funds are needed.
Unfortunately, the positions of the front-end load (AA) and administration fees (VG) are also directly next to each other. As a stockholder aptly notes, an AA usually affects far less than the VG, which is not based on the savings contribution but on the fund volume. Since Riesterfreund earns his money with these products, he will only be familiar with the cost positions, such as commissions and maybe TER. If he knew about the massive internally hidden costs in fund policies, which are NOT included in the sample calculations, he could no longer sell these products with a clear conscience as a serious consultant. And a good part of these costs are also included in the pure funds. However, since intermediaries receive their training from product suppliers, it is unlikely that they were involved in the development and know the true construction of the products.
As a fee advisor, I deal with exactly these things. Even with the best funds today, you cannot know how they will develop in the future. Therefore, it makes sense to include insurance, e.g. long-term planning. Use net tariffs to be able to switch there without AA funds and of course to take advantage of the tax effect. This is often so large that the insurers’ VG is not so important. But it is important to deal with the investment costs yourself. That’s where the point that investors can still influence is there. Long-term studies have shown that it is better to put ETFs in the portfolio instead of normal funds. As a side effect, as an investor you can easily understand this construct, including the associated costs.
Kind regards from Lake Constance
Make financial education a school subject
This article is a good help for parents who want to create something for children.
M. E. But parents should do a little more: Familiarize the children with critical handling of finances as early as possible, especially with the costs of investments. It would be best if financial lessons included "Cost-Doctrine" would become a school subject. Because: If Hänschen learns that, the Hans will not later be ripped off with overpriced Riester pensions.
Best regards, Uwe Lange
Hello share friend, I am one of the consultants who offer all of the above products, so I can also consciously recommend fund savings plans and FRVs. Both are justified and fund savings plans are better suited for the medium-term horizon. For the long-term investment and that was what I was looking for, I still think the FRV is very useful. Incidentally, the FRVs I recommend do not have AA when changing, and it is also worth taking a look at the small print here. I did not discuss the management fee because it applies to both products.
In your opinion, I think about stocks. However, I disagree with your statement that there is no front-end load (AA). This also applies here. In the case of a change, this only occurs if you switch from a fund with a lower AA to a higher AA. So it is at least in the general insurance terms of a lot of Insurance companies described. In the long run, an AA has little impact on SAP results. The return is most influenced by an administration fee (VG). The higher the VG for the same AA, the lower the savings in the end. Many people only see the AA because it is immediately identified (through different redemption and issue prices). They are also based on the height, because 5% AA sound much more than 1.5% p.a. VG. The projections show a clear picture, with 5% AA and 0% p.a. VG I have an incomparably higher amount of savings at the end than with 0% AA and 1.5% p.a. VG.
Are you one of the insurance agents that actively market FRV??!
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