.How to save for your children
With these 5 savings goals, you can build a financial cushion for your offspring
The older the children, the greater the needs and wishes. With these tips, you save early on your driver’s license, a stay abroad, study or your child’s first own apartment.
As nice as it is to have children, the offspring costs money. According to a communication from the Federal Statistical Office, parents spend an average of 763 USD a month on the offspring. Calculated at 18 years, this brings together a sum of almost 165,000 USD, which inflation has not yet been taken into account. A considerable amount of money. But in many cases, this is not enough. This is followed by training, studies or the first own apartment.
Few young people and young adults manage to cover these expenses without the financial support of their parents. All the better if they started saving for larger items at an early stage and can thus financially support their offspring. And this is how it works:
1. Savings for the driver’s license and the first car
Although the mobility turnaround is gradually underway, young people in the countryside in particular depend on a car. You need it to get to work or want to be mobile and independent. A driver’s license is required for this. But driving lessons and driving test are expensive. The Moving International Road Safety Association had determined an average cost of 2182 euros for obtaining a driver’s license in 2020. However, the actual price of the driver’s license depends heavily on how many driving hours and attempts your child needs to successfully pass the exam.
It is unlikely that prices will fall in the next few years. On the contrary, due to general inflation, which also makes vehicles more expensive, costs are expected to continue to rise. Parents who want to finance their children’s purchase of a driving license should therefore aim for a savings amount of at least 2,500 USD. If you also want to save for the first mobile base of the offspring, you have to plan a much higher savings amount.
Our savings tip Very uneven.
Start saving on your child’s driver’s license and car in good time. This gives you enough time to get to the total amount with smaller monthly contributions. To achieve this, you can, for example, use a savings plan. With a monthly savings sum of 25 euros, you have secured the financing of the driver’s license after about eight years.
Another advantage of the savings plan: You remain flexible, can suspend savings rates and easily get your money.
It is also possible to invest individual sums, which were given, for example, for youth consecration, communion or confirmation. For this purpose, fixed-term accounts, from which money can also be withdrawn in between, and savings certificates, in which the money cannot be touched for a certain term, are suitable. The advantage in both cases: There are fixed interest rates.
2. Save for a dream trip or stay abroad
Learning a new language, participating in a work-and-travel program or simply broadening their own horizons – many young people want a break abroad after graduation.
This phase in the lives of young people is an ideal time to gain experience abroad anyway. Family obligations and the first real work only beckon on the horizon. So why not use the time after school to bridge a few weeks or months and have an experience for life?
One of the biggest obstacles: money. Because dream trips or longer expeditions are not cheap. Depending on the destination, the costs vary immensely. For a longer stay abroad, including a flight, there are a good amount of 5,000 euros and more.
Our savings tip How saving money for kids
Over a period of ten years, installment savings are advisable for a savings goal of this amount. You save a fixed amount to an account every month by standing order. Third parties can also simply participate. Perfect for the undecided: The running time is flexible. Many offers also have a savings premium.
3. Savings for studies or training
Studying or training is not cheap. In particular, the costs for rent and additional costs are currently rising sharply. Any part-time jobs or the training salary are often not sufficient for your own cost of living. It is therefore helpful for young adults if they already have a financial basis. This allows them to concentrate on completing their vocational training quickly and as smoothly as possible. Because it is clear that if you have to work, you have less time for learning.
It is difficult to estimate how much additional money your child actually needs to make a living during training or studies. Over a period of at least three years, however, 10,000 to 20,000 USD quickly come together – depending on where your child lives and what he needs for his education. Check whether state support such as BAföG and vocational training assistance are eligible for your child.
Our savings tip
Saving education is just the thing for this savings goal. how saving money for children You pay a fixed installment monthly and benefit from interest and compound interest over time. In addition, you will receive a bonus every year. The longer you deposit, the higher it will be.
Another advantage: Grandparents or godparents can also participate in saving education.
4. Savings for the first setup
There are costs associated with every move – even if your child leaves the parents’ four walls. No matter where you go, whether in your first own apartment or a shared room: First renovation work is required, then it is necessary to buy a first interior.
Sofa, bed, desk, wardrobe, computer, kitchen table and chairs: There are many cheap suppliers of furniture. There are many things needed and yet a few hundred to thousand euros quickly come together for the initial equipment.
Our savings tip
In order to save sums of this amount over several years, how saving money for children equity funds are a possibility. Either you pay a one-off amount directly, bet on a savings plan or combine these two options. Especially with longer-term investments, stocks are a good alternative, because a higher return than other forms of savings is to be expected. Please note, however: Equity funds are subject to fluctuations.
5. Savings for long-term asset accumulation
Would you like to improve your child’s starting chances of their own life? how saving money for children Then lay the foundation for long-term asset accumulation today. Even small amounts that are regularly saved in stocks and funds pay off in the long term.
An alternative to the monthly savings rate is the use of child benefit. Instead of spending this state support every month, you can invest the amount – if your finances allow it – in a fund savings plan. If you invest a fixed sum in an accumulating fund, your return can add up to a considerable amount over the years. Accumulating funds do not distribute profits directly, but retain the income and reinsert it. So you take advantage of the compound interest effect.
Are you afraid of the ups and downs of the stock exchange? The fact that prices sometimes fall is no reason to avoid funds in principle. According to statistics from the Deutsche Aktieninstitut, investors have never suffered losses with a Dax index fund over the past five decades – as long as they kept the fund for more than twelve years.
Important: The earlier you start, the better. how saving money for children The more time you have and the longer you deposit, the stronger the power of compound interest unfolds – and the higher the return.
Example: Anyone who invests 100 USD per month in a fund savings plan from the birth of the child has saved an amount of almost 35,000 USD in time for the age of majority after 18 years (with an assumed return of five percent annually).
Of course, no one can guarantee that these above-average returns from the past will continue to be repeated in the future. Because past performance is not a reliable indicator of future performance. But compared to safe zero percent in many other forms of savings, fund saving is an interesting alternative.
In addition, in view of inflation, you should set your savings rates conservatively. Our consultants will be happy to help you with this.
Save right for your child
You decide individually which of the above options and which savings amount are suitable for you. There are many alternatives to the four forms of savings presented. Basically, the intention to help your child financially by saving early is laudable. However, you should not forget that you must not be neglected either. First, cover your regular costs, keep an eye on inflation, pay off debts and only then start looking for a suitable investment for your child.
Saving money for children