There are various options for parents or grandparents who want to set aside a certain amount for their (grand)child for the future. The most obvious option is to open a savings account and deposit money into it. Another good option is to take out a savings deposit. A less good alternative is the study plan. Read all about these options to save for your child in this article. There are several ways to save if a child’s parents or grandparents want to put money aside for his or her future. There are certain advantages and disadvantages to each method. In most cases it is best to open a separate savings account. Many banks offer separate savings accounts that are intended to save for children and grandchildren. There are often attractive conditions attached to the account, such as a special bonus interest on the birthday. At the same time, there is a risk that the normal interest rate is low. So pay close attention to that.
Close a savings account for the children
You can have the account in your own name or in the name of the child. The advantage of having the account in your own name is that you retain control and access to it. If you put it in the child’s name, you can agree with the bank that the child can only access the money at a certain time from a certain age, but in any case you will never have access to it yourself again. This arrangement is called the BEM clause. This stands for Own Resources Decision. A disadvantage of having the account transferred to your own name is that inheritance tax must be paid in the event of your death. This is not the case if the money is already in the child’s name.
It is good to know that you pay wealth tax on your savings. And until the child is eighteen, you also pay this from him or her. However, this only takes effect when your average annual capital is greater than 20,661 euros. And you also have an exemption of 2,762 euros per child.
A second option you have is to take out a savings deposit. The longer the money is tied up, the higher the interest. Taking out a deposit is especially useful if you want to deposit a large amount at once. It is best to take out this as early as possible so that you receive more interest on it. You can agree with the bank that the deposit will be released, for example, when the child is eighteen years old or has obtained a driver’s license. If you put more than five thousand euros in deposit, you must pay tax on it. The tax authorities then charge gift tax. Grandparents are allowed to donate a maximum of two thousand euros per year without having to pay tax on it.
The last option you have is to enter into a so-called study plan. In that case, you deposit money into an investment account. This money is then invested by the bank and you receive the final return. Ultimately this can yield more, but it can also be disappointing. Those are the risks of investing. The bank also usually charges relatively high costs for the investments. So make sure you inform yourself well before you do this.