Saving for children? Clever alternatives and what is really worthwhile for your offspring
What will the world of tomorrow be like in which our children will one day live? And how can mums and dads make them the best possible for them? You probably know the feeling, the concern for a secure future for the little son or daughter. They should have a good life later, make dreams come true and be able to fulfill wishes. They should live in a world in which they receive good training and can develop as carefree as possible. In order to lay the foundation for all of this today, the topic “financial provision" an important role.
Most parents are well aware of their responsibilities in this regard, but are very concerned and don’t really know how to do it.
Below you will find out how Saving for kids today works what is really suitable and what you should rather keep your hands off.
- What you need: The right financial product
- What you don’t necessarily need: a five or six-figure investment budget
So don’t worry, you shouldn’t have the huge sums of money to invest in all the purchases that young families need. Even small amounts can make a difference.
What is your goal and what are the savings goals? How much should you save for children? Not to be confused: the 2 different savings options
About the author: Thomas Henrich, project manager Commerz Real AG
Dear readers,
I have been explaining the products of the financial world to private customers for over twenty years and have specialized in the open real estate fund “hausInvest” in recent years. I have set myself the task of conveying the basic knowledge to potential investors, which enables them to confidently make the right investment decision for themselves. a. about this guide.
I hope you enjoy reading it!
Dear readers of this guide,
I would like to introduce myself so that you can get an idea of who is writing for you.
In the Commerzbank Group, I have been involved in explaining the bank’s products to private customers for more than twenty years – formerly with brochures, brochures, posters, now more with websites, newsletters, graphics and films.
In the past ten years, I have even looked after only one product, the open-ended real estate fund “hausInvest” from Commerz Real. Right from the start, I noticed that customers are often undecided because they cannot be sure-footed on the terrain of financial knowledge.
Back then we researched where it came from and found that school, family and work do not convey any basic knowledge of the basics of our “financial world”. A basic knowledge that enables everyone, for themselves evaluate products and services in the financial world themselves and make a confident purchase decision. There was not even a consensus on what is the basic knowledge that everyone should have.
At the time, we developed this basic knowledge with a panel of experts and made it available to the specialist public: the "canon of general financial education" from the Commerzbank Idea Lab. A first step, many steps have already been taken on the subject today. But to this day, the question has not left me: “How can I make complex finance understandable to consumers?"When my colleagues came up to me and said," Couldn’t you even write this down in a guidebook? "I couldn’t say" no ".
I hope you enjoy reading it!
Yours Thomas Henrich
Project manager / Commerz Real AG
What is your goal and what are the savings goals??
If you don’t really know how to start: When saving money for children, the focus should first be on the actual savings goal. What exactly is the money intended for? Is it about the training, the driving license or the future apartment? Is it maybe that the child can later fulfill a certain heart wish and you can look into the sparkling eyes of a child? The only question is whether the little man or girl should then be eight or already 18, because there is a basic distinction between short-term and long-term savings goals instead of.
Short-term savings targets are sums of money that are available at any time and at short notice as the child grows up. Often, especially This money can be used during the child’s school days to finance school books, additional tutoring or school trips. Hobbies and leisure activities can also be paid for with this money.
For short-term savings goals, for example, overnight accounts are suitable, which allow quick access to the money sums, but are associated with low interest rates.
Long-term savings goals, on the other hand, are usually about sums of money that are intended for the period after graduation or after reaching the age of 18. Driving a license or buying your own car is associated with high costs, which young adults generally cannot pay out of their own pockets. These sums of money can also be used to finance later studies or financial support during training. In addition to the running costs, such as the cost of rent or clothing, larger sums of money such as Expenses for stays abroad apply.
For long-term savings goals, the choice should therefore go to financial products with longer maturities that bring higher returns. At least the purchasing power should be maintained. Remember, a driver’s license, for example, will definitely cost more in 18 years than it does today. In order for every euro that you invest today to grow with it, you should choose a financial product that will at least maintain the value of the money or even a little more.
It is advisable to invest through a savings plan, e.g. in form of Fund savings plans for children.
You pay a predetermined amount of money each month into the corresponding fund. This savings rate can be increased at any time and supplemented by one-time higher additional payments. With the profits made over the years, higher costs can be met later – so you should start saving for the long term as early as possible. Especially when it comes to larger sums of money. The longer you invest, the better.
The following table shows a few examples of savings targets in direct comparison. Note the topic of inflation (inflation rate July 2019 = 1.7%). In 18 years you will face different costs for driving license and Co. than today.
savings target | investment horizon | financial product | Cost today |
---|---|---|---|
school trips & student exchange | In the short to medium term | Overnight money accounts, fixed deposit accounts | Approximately 5,000 euros |
driver’s license | In the medium term | Deposit Accounts | Approximately 2,000 euros |
automobile | Medium to long term | Fixed-term deposit accounts, open-ended mutual funds * | Approximately 8,000 euros |
home furnishings | long-term | Fixed-term deposit accounts, building society contract, open-ended mutual funds | Approximately 5,000 euros |
Master training | Medium to long term | Open mutual funds, educational savings | Approximately 10,000 euros |
Education | long-term | Open mutual funds, educational savings | Approximately 50,000 euros |
wedding | long-term | Open-ended mutual funds | Approximately 10,000 euros |
Open-ended mutual funds or open-ended investment funds are e.g. Pension funds or open-ended real estate funds in which everyone can invest and buy shares at any time.
How much should you save for children?
There is no general answer to the question of the optimal amount of savings. It is important that the savings plan for children consists of continuous monthly deposits. This means that you should realistically estimate in advance how much you can set aside each month. To be considered …
- First: monthly expenses
- Second: emergency reserves
To give you an estimate of how high these monthly expenditures and reserves should be: According to the official evaluation from 2013 by the Federal Statistical Office, published in 2018, the following applies: “In 2013, couples with 1 child gave an average of 3,065 euros per month for private consumption out. They used 660 euros (21.5%) of the child’s consumer spending. ”
Of these 660 euros, they invested in:
- Food, beverages and tobacco products: 18.1% = 119.46 euros
- bekle >The reserves, which should be secured in addition to the daily expenses for emergencies, are in about 3 months’ salary. They are e.g. contemplated for unforeseen repair costs for the car or the like. Anything beyond that can be invested. This is only the amount of money that you can raise yourself on a monthly basis and in the long term – money gifts from grandma and grandpa for your birthday are not included here. Depending on the income, the savings amounts can vary widely, monthly installments from 10 euros are already possible. It always depends on how you invest the money.
The following calculation uses the example of an open-ended real estate fund with an average return of 2% to show what sum can already result from a monthly savings amount of 50 euros up to the child’s 18th birthday. Since it is a so-called reinvesting funds the amount generated is automatically reinvested at the end of the year:
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