In the check: Is a savings account for children still worth it?
The savings book is a popular investment for children, especially because it is considered to be particularly safe. But is a savings account for children still worth it? What are the advantages and disadvantages and what are the low-risk alternatives to savings accounts for children? We give you tips on how to save with a savings account.
Once the child is born, the question arises of a safe way to invest money for its future. Many parents and grandparents then decide to open a savings account for their children and grandchildren. The principle of the savings book is simple: the saver lends his money to the bank and in return receives interest at the end of the year. The investment is therefore independent of the exchange rate, which is why a savings book for children is considered particularly safe.
Giving away a savings book to children
Many children are given a savings book for baptism, communion or birthday. In order to open a savings account for a child, the bank requires a declaration of consent from the parents. It can be agreed whether dispositions should be possible before the child is 18 years old and whether the child may only make dispositions together with the parents or alone. Payments can only be made upon presentation of the savings book.
Another option is to open a savings account in your own name and give it to your child when they turn 18. Then no parental consent is required and you can be sure that only you can dispose of the credit in the savings account up to the point in time when it is overwritten.
However, before you decide on a savings account as an investment for children, it is important to weigh up the advantages and disadvantages of this form of saving. We have put together some arguments for you:
Advantages of a savings account for children
- No minimum deposits: When opening the savings account, no specific amount of money has to be paid in to secure interest.
- constant availability: it is possible to deposit and withdraw money at any time.
- Flexible maturities: The savings book is an unlimited savings deposit for children, which means it can be terminated at any time subject to the notice period.
- Safe investment: A savings book for children offers a safe investment. On the one hand, the money invested is safe with the credit institutions, since it is covered by the deposit insurance. This means that if the bank goes bankrupt, your child will be paid back the savings. On the other hand, the interest rates offered, which are based on the current market interest rate of the Bundesbank, are also secure.
- No account management fees: There are no costs for the savings book for children, and opening and closing the savings book are free of charge.
Disadvantages of a savings account for children
- Limited payout: Amounts higher than 2,000 euros can only be paid out if the desired amount is announced three months in advance. Otherwise, advance interest must be paid.
- Termination : The savings account can only be terminated subject to a three-month notice period.
- Low interest rates: With an average interest rate of less than 1%, the savings book brings little return for children.
- Loss of value: The money constantly loses value due to inflation, but the loss of value can be compensated for by interest. If you want to create a savings account for children, the interest rate is often below the inflation rate, so that the loss in value cannot be offset. Then the credit in the savings account suffers a real loss in value. Real value retention or even growth can only be expected from an interest rate of around 1.5%, which is higher than the inflation rate.
In order to learn how to handle money, a savings book is suitable for children from around eight years of age. Then they have a good understanding of numbers and know simple arithmetic such as addition and subtraction. With a savings book, children can understand exactly what happens to their money and see how accounts are kept of the receipts and payments of their money. It makes sense to deposit or withdraw money from the bank together with your child. In this way, it finds out where its savings are and can also get an impression of the tasks of a bank.
Is a savings account worth it for children?
If you want to create a savings account for children, you should consider what purpose it should serve. If you want the money to be kept safe without putting it at risk, the savings book for children is worth considering. However, if you want to invest as large an asset as possible in order to be able to finance your studies or your child’s larger wishes later, a savings book is not worthwhile due to the often low interest rates. In this case, you should consider the following possible alternatives to the savings account for children:
Alternatives to savings accounts for children
- Savings certificate: If the availability of the savings is not so important to you, you should think about a savings certificate. This offers you the same security as a savings book for children. With a savings bond, you invest the savings for a fixed, non-cancellable term and receive a constant interest rate that is higher than with a savings account for children. Savings bonds are available with maturities of between one and ten years. The following applies: the longer the term, the higher the interest rate. Unlike a savings book for children, however, a savings certificate requires a minimum deposit, which varies from bank to bank.
- Savings plan: With a bank savings plan, the money is invested for a flexible term of one to 30 years and is usually not available to the saver during this time. However, a savings plan can be terminated after a three-month period. In contrast to a savings book, saving for children with a savings plan is firmly planned: a minimum amount must be paid in every month or even once at the beginning of the savings plan, which earns interest at the end of the year. Interest rates during the term can be either fixed or variable, meaning they fluctuate from year to year.
Savings plans that work with monthly installments are particularly suitable for building up a fortune with pocket money or child money or for saving towards a specific goal, such as buying a car or going abroad. The savings plan with a one-time deposit is ideal for those who can invest a large amount of money at once and want to receive a higher return over a shorter period of time.