Child savings account – everything from account opening to saving – LoansLoans
A child savings account is always worthwhile. Nordea’s survey shows that up to half of Finns save money on their children’s savings account. A savings account can save a worthwhile nest in egg for children, who at best can provide help with offspring housekeeping for years to come. If you are thinking about setting up a savings account for your child, keep reading.
Opening a savings account for a child
Opening a savings account for a child is very much like opening any other account: the child’s personal identification number and name are required, as well as the consent of both custodians. However, an account cannot be opened for an unborn child. In addition, custodians do not necessarily need to be involved in opening a child savings account; But even if someone else opens an account, the ultimate access is always up to the child’s guardians, so opening the account itself does not automatically guarantee access.
The minimum deposit and withdrawal limits for a savings account vary by bank, so you should always check them separately on a case-by-case basis. For example, Goodbank’s savings account has no withdrawal limits or minimum deposit requirements.
Use and management of funds
The money in the account is finally decided by the child’s parents, but the money in the savings account is always considered finally the child’s property. Therefore, the funds should always be spent in the best interests of the child.
When a child reaches the age of 18, the parent’s access to the savings account ceases and the child himself or herself has the right to manage and decides on his or her own account. Usually around this time, the bank in question also contacts the adult to arrange an appointment to discuss the account holder’s banking services.
Saving a child’s account in practice
Some ways to save a child account are a monthly deposit and a great first deposit. A standardized monthly deposit amount can be useful, especially for those who have not yet made larger purchases at the expense of the family. For example, if a family car is not yet purchased, you might consider using extra money to pay for it in order to save on the total cost of the loan in the long run. If, on the other hand, you have already made larger purchases for the family, you may consider putting a bigger pot in your savings account to increase interest rates.
You can donate up to € 4,999 of tax-free money to a child over a three-year period, meaning a maximum monthly savings of € 138. Of course, the amount is only per person, so parents can donate to a total of $ 9,998 over three years or $ 276 per month to their child. Of course, donations from relatives are also counted separately.
In addition to saving gift money, a good example of another form of saving is saving for child benefits. The child allowance is paid monthly until the child reaches the age of 17. Currently, the child allowance is EUR 94.88 for the first child. So, if you save the entire amount over 16 years, the final savings amount to about € 18,217 before inflation and interest on your account. If, on the other hand, you save half of this amount, it will make $ 47.44 per month and about $ 9,108 for the entire child benefit payment period. You might want to try calculating your savings amount with a handy savings calculator.
Below we compare savings to a savings account with gift money and a monthly child allowance. In this example, the gift money is donated by three different people, each giving a tax-free donation of $ 4,999. The monthly child allowance, on the other hand, has been rounded to € 95 to clarify calculations.
By comparison, saving with gift money is more profitable, because then the entire savings amount accrues interest from the first day. The child benefit, on the other hand, accrues little to the account, which results in a lower interest income overall. Even so, saving on child allowances can save you a considerable amount of money over 16 years. For example, 21,000 euros makes it easy to pay your child for a good car. After all, both of these methods are worthwhile means of saving the child. The most important thing is to choose the one that best suits your life situation.
You may be wondering why you need to save money for your child at all? Children when they do not necessarily appreciate the amount saved because they have not worked for it. As a result, they can just as well spend money on unnecessary amusements.
However, this may not be the case if you spend enough time educating your child on finances. Also, not all of the savings need to be kept in the account until the end, and you can always withdraw money from the account when necessary in the event of an unexpected expense on the child. Such expenses may be, for example, a banquet or a driving license. If the real money-saving target is a longer-term goal, such as a first home, where the account will already be in the child’s possession, then it is a good idea to tell the child in advance.
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