Save for – s kind, 11

Save for the kid

Creating a financial cushion for children is not a new topic, and parents or guardians always ask themselves the following question: Saving for the child – What type of investment offers and brings a good return? We introduce the various investment options.

Worth saving at all?

Of course! Because without financial reserves, bottlenecks can generally occur. Children grow and with them the needs and demands. In order that wishes, which are in the near or distant future, can be realized easily, offer themselves orally safe investments such as passbook, call money or time deposit. Trustworthy means that they are not investment vehicles with a risk of loss or speculative character.

Popular savings

  • Daily money account for children
  • Time deposit for children
  • Passbook for children

The passbook – well-tried, but not up-to-date anymore

The savings account with interest rate is the classic among the investments when it comes to saving for children. But interest rates are at such a low level, usually well below 1%, that even high deposit amounts will not bring in an effective return in the long term. Also in terms of flexibility, the savings account can not keep up with the child day allowance. Notice periods must be observed, higher withdrawal amounts usually have to be registered in advance with the bank. On the other hand, the passbook is anchored in the minds with a great deal of certainty, which is why parents often still weigh up their calculations. With the direct banks, the passbook is usually left out, here is the daily allowance for children with attractive conditions in the foreground.

Daily allowance for children – The flexible and interesting investment for the offspring

Day money is in the foreground for many today, when it comes to investing, which provides an attractive return with high flexibility of action. Above all, direct banks offer daily allowances for children, with which savings for the child can really pay off. A money market account comes with no notice periods, the money is available at any time and in the desired amount. The interest rate is variable, but can be set by a guaranteed interest for a certain period of time, so that the income can also be better planned. The interest rate is often over 1%. In addition to the interest rate, however, it depends on the period of the interest credit. If the interest is credited monthly, the investor benefits from the direct compounding effect. The amount of the interest rate may also be tied to a certain deposit amount. If the deposit amount is reached, the interest usually falls down. The deposit insurance is another point that is important when choosing a child day money account. It indicates up to what amount the deposits are definitely paid out again by the bank.

A child day money account will be opened by the parent or guardian, however the child should be registered as the owner. Until the age of majority, the power of disposal remains with the legal guardian. This way the money can be safely managed. Some banks offer attractive savings plans through monthly fixed deposits, which can be be settled by standing order. Savings accounts with sub-accounts allow the definition and management of various savings targets.

The big advantage of the child day allowance lies in the disposal flexibility. It therefore lends itself very well even for short savings periods, if necessary, the required money is simply transferred to the reference account.

Time deposit for children – better suited as a long-term investment

Time deposit is also one of the safe money investments and is therefore also in terms of saving for the child an option. As with the daily allowance, the guardians have the account power, while the child is registered as the owner. In contrast to the overnight money, the investment takes place over a fixed period of time and at a fixed interest rate. In addition, the interest rates are often higher than those on the daily allowance. The money is tied to the bank during the investment period, and the customer can not dispose of it until the investment period has expired. The duration of the investment may vary depending on the bank and the offer. There are already offers with terms of less than one year. Saving for children with fixed-term deposits is primarily seen as a profitable long-term savings target as a profitable investment option.

The child as the account holder – Important for the tax-free allowance

The owner-led passbook, Tagesgeld-, or fixed-term account is immensely important when saving for children. If the child is registered as the holder, the tax deduction due to him for the final withholding tax can be fully utilized. For each form of investment, therefore, an exemption order should be placed with the respective bank.

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Christina Cherry
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