Table of contents
Pregnancy and the first weeks of your baby’s life fly by. There’s nothing you want more than to enjoy this time and hold on to the memories forever. But now is a good time to start thinking about the future: What’s the best way to save money for your child?
Most parents want to provide their offspring with a financial cushion – ideally as large as possible. But for this to succeed, money should be invested as early as possible. Unfortunately, classic savings models are no longer really convincing due to their low-interest rates. The alternatives in this article, however, can be very lucrative – a good cushion is sure to accumulate over the next 18 years.
Children’s Depot For Sharesn
Shares are considered speculative and carry a certain amount of risk. Nevertheless, more and more parents are deciding to open a securities account for children. The reason for this is usually the desire for higher returns than the bank can grant for savings deposits.
Good Returns Over The Long Term
If you’re now thinking, “but I’d like to invest the money for my child more securely,” that’s perfectly understandable. After all, most people think of quick stock trading with highly volatile stocks – such stocks can make you rich, but they can also make you poor just as quickly. This form of stock trading is indeed very risky and should be reserved for professionals.
But it doesn’t have to be that way. There are numerous stocks and other values on the stock market that are suitable for long-term investments. And long-term is probably also your savings goal for the offspring. Most parents want to give their child the savings for their 18th birthday, for moving out, for building a house or for the wedding. A lot of time will pass before then, and if you use it well, you’ll end up with as much as possible.
But what is the difference between shares that are suitable for long-term investments and others? If you want to invest for the long term, you are more likely to bet on “safe horses”. These are securities that are highly stable on the stock market and show a slow but steady upward trend. The risk that such a rock in the (stock market) surf suddenly collapses is low. If you spread your savings capital for the child over three or four such stocks, you can reduce the risk of losses even further.
Deposit In Your Own Name Or In The Name Of The Child?
If you have decided to buy shares for your offspring, it is time to look for a suitable securities account. There are two ways to do this: Either you open a securities account in your name or you open it in your child’s name.
Deposit in your name
If the deposit is in your name, you can access the invested money in a financial emergency. Money invested in your child’s name could be counted towards Bafög payments at a later date.
Deposit in the name of the child
Opening a custody account in your child’s name is usually the cleanest solution because it clearly separates his or her capital from yours or yours as parents. Your child’s assets are thus safe from seizure or embezzlement of any kind. You should also bear in mind that capital gains tax is due on share profits as soon as you exceed the exemption limit. So if you already have investments in your name, it is more likely that you will have to pay taxes at some point. With your own custody account, your child can take advantage of his or her tax allowance without having to pay any of the gains.
Alternative To Buying Shares
Uncertainty is part of the stock market, especially in your case: You want to create a cushion for your child and not blow the money you have saved by making a wrong decision. If stocks are too risky for you, an ETF could be a good alternative. You can also save for an ETF savings plan through a junior custody account.
ETFs are considered safer because they are not based on the success of individual stocks, but reflect an entire stock market. Since the economy is constantly growing, the returns are also solid – ETFs are therefore perfect for an investment horizon of ten to twenty years.