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Which investment for children makes sense?

Which investment for children makes sense?

It is not uncommon for parents or grandparents, uncles, aunts or godparents to donate money to a child or set up an account. But what investment for children is the best?

The local savings banks often welcome the new citizens with a voucher, which is credited to the account when opening a savings account. The passbook was the first account for newborns actually standard. However, not only the historically low interest rates, but also the realization that there are definitely more lucrative forms of saving, has led to a rethinking.

Checklist of saving forms

  • call money

Tagesgeld is a secure investment with variable interest rates and is suitable for saving large sums of money. Many banks offer free online money market accounts with attractive interest rates online. Before setting up a call money account, a comparison of various providers must be made, it should be noted that not all offers for minors are available. Particularly advantageous in the daily allowance is the daily availability. Disadvantages of overnight money are reflected in spontaneous changes in interest rates, which may turn out to be detrimental to the investor. To the daily allowance for children comparison
fixed deposit

Time deposit is also a secure investment at attractive interest rates, which are fixed over the duration of the fixed deposit. With many banks savers can open a free time deposit account. For time deposits, a certain amount is invested over a fixed term and bears interest accordingly. Time deposit is not available for the duration of the investment period. Time deposit is suitable as a long-term investment, if the money is not needed during this time. To the deposit for children comparison
passbook

The money to invest in a savings account, is not up to date and still the most popular form of investment in Germany. Savings books are available at some banks and savings banks, but not online. The interest is extremely low. The investment form is safe. However, investors save on the savings book, without generating a significant return. Disadvantage of the savings account: Considering the inflation, saving money on a savings account is money destruction.
savings bonds

Savings bonds are available with annual maturities ranging from at least one year to a maximum of ten years. Like daily and fixed money, the money is protected by the statutory deposit insurance. The interest depends on the duration of the loan and is comparable in terms of amount to the time deposit. Before the plant a comparison of different offers is recommended.
Federal bonds / Federal Treasury notes

Federal Treasury notes were bonds of the Federal Republic of Germany. Until December 31, 2012, they were given to savers with terms of six or seven years. With effect from 01.01.2013, the Federal Republic of Germany has suspended the issue of new Federal Treasury notes. This safe form of savings is no longer available to investors. Private customers can buy federal bonds against fees from their house banks. These also offer a high level of security and an attractive return.

passbook call money fixed deposit savings bond Bund
Ø return 0.05 – 0.2% 0.5 – 1% 0,8 – 2% 1 – 2% 0.5%
strongly fluctuating
deposit guarantee minute 100,000 € minute 100,000 € minute 100,000 € minute 100,000 € –
running time available at any time, cancellation with 3 months notice available daily 1 to 10 years,
high maturity higher return		 1 to 10 years,
high maturity – higher return		 10 & 30 years

As of: 11/2019

Compare daily allowance for children

Call money is absolutely secure, flexible, always available and bears interest. In our child day-money comparison we compare some of the most attractive offers that can be opened even for minors.
For comparison, daily allowance for children

The search for the right investment for children should not end at the bank around the corner or the insurance agent in their own living room. Daily allowances are a real alternative, even in periods of low interest rates, provided you choose the right provider. The most lucrative providers can be found on our daily allowance comparison for children. As part of our comparison, it quickly becomes clear that the currently around 0.3 – 0.5 percent (as at 05/2015), which are offered in the savings bank and branch banking sector, are not the last solution. Deposits-specialized direct banks, often from other European countries, currently offer a return of two percent after the last interest rate cut. As the daily money market is highly competitive, one or the other bank also pays a new customer premium. This is a nice extra gift for the offspring. Day money accounts are managed completely free of charge, disposals are possible daily in full without prior notice and the savings are subject to deposit insurance. For banks from neighboring European countries, a hedge of up to € 100,000 per investor applies.

Time deposit for children

Time deposits are a double-edged sword. The longer the interest rate, the higher the interest – this wisdom has no longer been valid for some time. If one compares the terms and conditions for daily allowances and time deposits at the investment fund for children, term deposits, including fixed deposits, quickly fall into the background. While daily allowances can be arbitrarily reserved or withdrawn, the fixed deposit account is subject to a certain amount of time being fixed for a given period of time. Especially at the beginning of the savings phase with little capital so no feasible solution. Later additional payments are just as impossible as orders before expiry of the fixed interest period. Currently, the spread between overnight money and time deposits is so low that a commitment should take at least three years to achieve a low interest rate advantage. However, if capital market interest rates rise, the investor has no opportunity to liquidate the account and convert it into a higher-yielding investment. Time deposits are as unsuitable as investment for children, as a home savings or life insurance, even if they are not prone to acquisition costs.

Fund savings – the royal road for long-term asset accumulation

Who wants to prepare the young for the long term the way to a lucrative asset accumulation, can not ignore a fund savings plan. It is not even mandatory that a regular saving is made, it is quite sufficient to open a deposit with the desired minimum deposit. Co-payments can then be made completely arbitrarily, with money gifts for a birthday or for Christmas. The argument that a fund is burdened with high fees is not entirely correct. The largest cost item is the sales charge. However, a deposit comparison shows that there are now enough online brokers and direct banks that do not pay the initial charge, if not completely, but in some cases. Custody fees are no longer incurred by most providers. Investments for children are a long-term investment. Equities and equity funds have proven that over a multi-year period, yields are well above those of other types of assets. In addition to complete flexibility in the purchase of shares, a spontaneous disposal of capital is possible. Nevertheless, one should keep in mind that stocks require a certain lead time. The regular acquisition of shares has another advantage. Due to the average cost effect, the total return of the portfolio increases once again. Whoever pays a regular amount, buys, depending on the stock market once more, once fewer fund shares. The past has shown that, despite all adversities, there is only one way up for the stock market. The shares acquired at a lower price thus once again have a significantly higher profit than the shares that were bought when the stock market rose. In the long term, this always pays off.

The best investment for minors

The best investment for children should be characterized above all by flexibility in terms of both the deposit and the availability. Call money and securities funds offer these advantages in combination with the currently best returns on the capital market. However, it is a prerequisite that investors make the effort to filter out the best providers through comparisons; otherwise, the high returns on costs or low returns quickly make them non-existent.

Against the background that a fortune investment for children has many years and spontaneous partial orders should be possible at no cost, Bauspar contracts and pension insurance, even if equipped with different options, only the second best solution. Both variants contain costs which are at the expense of the return. The daily allowance is flexible, safe and well-priced. This is a sensible investment for children.

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Christina Cherry
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