500 euros per year
According to a market study commissioned by Argenta with some parents with children aged 2 to 19, 68% of them save every month for their children. Only 25% of parents save through a formula other than the savings account. On average, those who save for their children, plan 821 euros per year for this purpose. Generous savers increase this amount considerably. The median is 500 euros per year.
A savings account in the name of your children
Despite the low rates, the savings account is still a safe bet for many parents. For this purpose, you can open an account in your child's name. As soon as he is of age, he will have full control over this account. You cannot withdraw money from an account or insurance on behalf of your children. You also cannot transfer their savings to a riskier savings or investment formula.
Those who still want to be able to access their savings have an interest in making payments into their own savings account. An intermediate solution: a savings account with stipulation for others. In this case, you open the account in your own name, but you designate your children as beneficiaries. You decide for yourself at what point your children will be able to dispose of the money.
94.5 euros interest after 18 years
Currently, most savings accounts have the minimum interest rate of 0.11% (base rate 0.01% + loyalty bonus 0.10%). If you pay 500 euros per year, your children will receive 94.5 euros interest after 18 years. However, some banks give better terms. The MeDirect Fidelity Epargne account , for example, grants a return of 0.85% (base rate of 0.05% + fidelity premium of 0.80%), which would correspond to 759 euros of overall interest. Of course, you must take into account that the interest rate may still change in the years to come.
A term account
The term account is a second option you have. In this case, you will save at a fixed rate for an agreed period. This formula is less suitable for you if you want to pay 500 euros every year since you will not be able to fund this account and you will therefore have to open a new account every year. Term accounts are subject to withholding tax of 30%. Currently, Izola Bank grants the best net rate: 1.82% for a period of 10 years. This percentage is guaranteed for the amount paid. If you want to set aside 500 euros again the following year, this will be done at the applicable interest rate at that time.
Branch 21: a better net return, but more costs in general
Branch 21 insurance (or savings insurance) is a medium or long-term savings product in the form of a life insurance contract. Your capital is protected and your savings efforts will be rewarded with a guaranteed interest rate and possible profit sharing (unsecured). Your contract can be linked to a final expiry date (and therefore to a fixed duration), but also to an indefinite period.
There are several costs associated with savings insurance, such as the 2% insurance tax on each premium paid, entry fees, possible exit costs and periodic management fees. If you withdraw your money within the first 8 years, you will also have to pay 30% withholding tax. Last year, the net return (gross return minus management fees) was 2% or more from different insurers.
For those who dare to take risks ...
Those who wish to obtain a better return and who are not afraid to take risks, can opt for an investment fund or for investment insurance (branch 23). In this case, you buy an investment product that invests in bonds, stocks and real estate, among other things, and keeps them in a securities file on behalf of your children. Thanks to the staggered annual contribution and the considerable investment horizon - via an investment plan or not - you will increase your chances of obtaining an attractive return. However, the stock market can be very finicky. Therefore, all forms of investing come with risk and they do not give you any guarantees of capital.
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