The stock market crashes in 2001, 2009 and 2011 led to uncertainty among many investors and thus also among parents who want to invest money for their offspring. The corona crisis was added in 2020 and the worry lines grew. Nevertheless, there is no getting around the stock market if yields are sought that are well above the current inflation rate. The focus should be on broadly diversified equity funds or ETFs (Exchange Traded Funds), which offer a lower risk of loss than individual stocks. ETFs are funds that are traded on the stock exchange and usually track a stock index, for example the DAX or an ETF savings plan such as OSKAR. This makes it easy to invest in a whole package of stocks. Advantages of ETFs are, for example, that in contrast to actively managed funds, ETFs incur fewer fees and ETFs can be bought and sold on the stock exchange at any time. In addition to a one-off investment in an ETF, parents can also make a monthly deposit into an ETF savings plan. The amount of the monthly installments with such a savings plan can be flexibly adjusted, i.e. it can be increased, decreased or even suspended at short notice.
Possible investments are, for example, an ETF on the global share index MSCI World, which combines many shares from different countries and industries. This diversification reduces the risk of loss. With a DAX ETF, you invest in all DAX companies and bet that the German economy will develop positively. In the long run, high returns are possible here. In the last fifty years you have not suffered any losses as an investor if you invested in German standard values and held them for at least 12 years, regardless of when you bought or sold. The annual return has averaged six to eight percent over the past five decades.
Home loan and savings contracts have minimal risk. As a building society saver, you save a certain amount at a fixed interest rate; this saving phase lasts around seven to ten years. After this savings phase, the home loan and savings contract is “ready for allocation”. The saver can then take out a building society loan from the building society, the interest rate of which was already negotiated at the start of the contract, or he can have the saved and interest paid out. This could take place at the start of training for the next generation.
For parents who want to invest money for their own offspring, a call money account can also be attractive, as it offers a high level of security and, at the same time, regular interest income. A call money account is a special interest-bearing account at a bank that the account holder can access at any time. There are also no notice periods. In the case of a call money account, however, it can prove disadvantageous for the investor that the bank has the freedom to change the interest rate at any time and to correct it downwards. Interest rates are often only guaranteed for a certain period of time, for example for the first four months after the account is opened. The interest rate offers for the first few months are currently only around one percent. One way to always secure the best interest rates is to change the underlying bank regularly, which of course involves a certain amount of effort.
Call money accounts are not intended for general payment transactions, which excludes transfers or direct debits. In order to make bookings, a reference account is required, such as a standard current account. The transfer to the reference account can take one to three banking days, which can lead to problems if the credit is to be accessed at short notice. In the case of a long-term time horizon, as is the case with saving for your own offspring, this aspect should, however, be neglected.
In contrast to overnight money, the money invested cannot be accessed at short notice with fixed-term deposits. With a fixed-term deposit account you decide to invest an amount for a certain period of time, usually several years, at a fixed interest rate. The longer the period, the higher the interest rate. The highest interest rate offered is currently 2.5 percent. As a rule, direct banks offer the best conditions for this. Thanks to the deposit protection fund, the savings are completely safe. Savers have to be careful with the term: This can be extended if not canceled in good time before the current contract expires. If you forget to close your fixed-term deposit account in good time, the capital may not be available at the start of your apprenticeship or when your youngsters move into their first apartment.
In Germany there are more than 2,000 housing cooperatives, which manage a portfolio of more than two million apartments and have a total of more than three million members. In order to become a member, shares in the cooperative must be acquired. In return, you receive compensation in the form of a dividend and you have the prospect of a cooperative apartment at a low rent. Depending on the cooperative, this dividend can be up to four percent of the capital employed. Around 50 of the 2,000 housing associations also have a limited banking license, which allows them to offer interest products such as savings books, time deposits or savings bonds. The savings books of the housing cooperatives often offer interest rates that are above the level of savings books at banks and savings banks. Children and teenagers in particular receive good conditions here. The savings are used to build and maintain living space and thus do not flow into the capital market as is the case with many banks. The savings of the savers are also secured by the self-help fund of the GdW (Federal Association of German Housing and Real Estate Companies).
Often, however, cooperatives only accept savers from the region.
Finanzen.net editorial team
Image sources: ollyy / Shutterstock.com, Katy Spichal / Shutterstock.com