Today it's all about fixed-term deposits for children. For fixed-term deposits there are currently depressingly low interest rates, but compared to most other investments, they have three major advantages: they are crisis-proof, the interest is guaranteed and once the fixed deposit is invested, the investor no longer has to worry about it until it expires. We provide an overview with everything worth knowing on the subject of fixed-term deposits for children.
- The interest rates of fixed-term deposits are significantly below inflation
- Many banks no longer offer time deposits
- Time deposits are risk-free, the offered (mini) interest rates are guaranteed
- Some banks offer special conditions for time deposits for children
- Experts expect a slight increase in interest rates by the end of the year
We recommend the time deposit account at pbb direkt: LINK
It is also possible to open a fixed deposit account for children.
Fixed deposit accounts for children: The comparison
First the bad news: because of the low interest rates and hardly any demand, many banks no longer offer fixed-term deposits at all. Many credit institutes require in the meantime starting from a certain free border even negative interest rates.
Now to the positive: Fixed deposit interest rates are currently rising (very slightly) and this also applies to fixed deposits for children. It is expected that there will be further small interest rate increases in the course of the year. Indications for it supply the building loan interest rates, which already rose. As a rule, banks adjust their interest rates on credit balances to the level of their required interest rates on loans after a certain time delay.
So it might be worth waiting a little longer before investing in fixed-term deposits – especially if their planned term is ten or more years. In addition, the interest rate on a fixed deposit account for children at many banks is a little better than on a normal fixed deposit.
Not to mention a standard demand deposit account. If at all, most banks give out for it in the meantime only interest in the per mille range. Which yields are to be expected against it with a time deposit account for children, about it the following comparison computer informs.
Where to find the highest interest rates for fixed-term deposits?
Of course, this depends on the term of the time deposit. The longer the term, the higher the interest rate. These move at present depending upon investment duration and credit institution in approximately between zero and two per cent.
Many banks, such as ING-DiBA or Comdirect, are currently not offering any fixed-term deposits at all. Others give very measly interest rates, such as Deutsche Bank through its business partner mymoneybank at 0.18 percent or Ford Bank at 0.1 percent – both for a one-year term.
Praiseworthy, however, the Consorsbank: there you currently get at least two percent for the same term for his time deposit. Postbank also offers two percent interest for fixed-term deposits, but only in combination with an investment fund investment.
Beware, by the way, of offers from credit institutions that have their headquarters outside Germany – even if it should be within the EU. There is not yet a common European deposit guarantee scheme, which is not due to be introduced until approx. Coming in mid-2024.
Until then, before you invest your money with a foreign bank, you should find out whether and how the bank protects its customers' money in the event of bankruptcy.
Can you get a fixed-term deposit for children before the end of the contract??
In principle, it is not possible to terminate time deposits prematurely, and this also applies to time deposits for children. However, this also depends on the respective bank as well as on the negotiating skills of the investor and the goodwill of the credit institution.
If, for example, a good customer of many years' standing has also parked time deposits with his bank, he may be able to redeem them at least partially prematurely in the event of an emergency. He could refer thereby to § 314 BGB. The allows early termination of a continuing obligation "for cause".
However, anyone who wants to get their fixed-term deposit early in this way should factor in a corresponding early repayment penalty. Because according to § 314 BGB para. 4, "…the right to claim damages is not excluded by the termination."
What is an early repayment penalty??
The early repayment penalty is a fee that a borrower has to pay if he terminates a long-term loan agreement prematurely. This is the case, for example, if he repays the entire remaining debt not as contractually agreed in monthly installments but as a complete sum at once.
However, an early repayment penalty only applies if the option to repay the loan early was not explicitly agreed in this contract. Anyone who considers it conceivable when taking out a loan that he or she will be able to repay the loan early, either in part or in full, should have the option of making special payments contractually guaranteed.
Most banks offer the possibility of annual special payments in the amount of four to a maximum of ten percent of the total loan amount in their loan agreements.
However, this possibility of special payments makes the loan a little more expensive. The following applies: the higher the contractually agreed early special payment can be, the more expensive the loan will be. If such a passage is missing in the contract, an early repayment penalty becomes due.
The amount of the early repayment fee is set by law in the EU Consumer Credit Directive. According to this, the early repayment penalty may not be charged on loans taken out since 1 January 2009. The maximum repayment amount for installment loans taken out in June should not exceed one percent of the remaining debt. If the loan agreement expires after less than one year, the maximum permissible early repayment penalty is 0.5 percent.
The reason for this early repayment penalty is that the lender suffers interest losses due to the early settlement of a loan, as it has to borrow this money itself against a certain interest surcharge.
The bank lives from the fact that it does not only pass on this interest markup to the borrower, but increases it still somewhat around a profit to obtain. In addition, early repayment that has not been agreed in the contract creates an additional administrative burden for the lender.
How to save for the next generation?
It is best to set up a children's account or junior securities account in the name of the children. Most banks offer this option and also grant favorable special conditions there. The advantage of such a children's account is that all friends and relatives can make deposits there for the child at any time and the legal guardians can manage the account in the name of the child but cannot withdraw money from it. This ensures that the child has access to the entire amount saved as soon as he or she reaches the age of majority.
Fixed-term deposits are one of the very few investment options that do not involve any risk of loss, because after all the interest is guaranteed and, thanks to the deposit guarantee required by law in Germany, the money invested is also guaranteed up to 100.000 Euro secured per credit institution.
Nevertheless, in view of the low interest rates for time deposits, it is worth considering whether to choose a form of investment with a better return instead. ETF funds in particular are recommended by financial experts such as Stiftung Warentest as the perfect investment for children.
ETFs are index-based, exchange-traded funds. With their broad risk diversification, they are considered quite safe. In addition they are inexpensive, have a very small administration expenditure for the investor and are ideally suitable as long-term investments with at least a five to ten-year term.
How much money should you save for your child?
First of all, this depends on one's own financial possibilities and on the question of what this money is to be used for later on. If the money is intended for a specific investment, for example a driver's license or the initial furnishing of an apartment, one also knows approximately how much money is needed.
This also makes it possible to calculate how high the savings rate must be in order to ultimately reach the required final amount. On the Internet – for example, on the Stiftung Warentest site – there are numerous calculators that can be used to quickly and accurately calculate the amount of such savings installments.
But perhaps the money is intended as a subsidy for the child's later, general living expenses – during his or her education, for example? Then, of course, it is decisive how much this allowance should be and how long it should be paid for.
In all these examples, the amount of the savings rate and the total term of the savings phase have a decisive influence on the total amount saved. The longer you save, the lower the monthly savings rate may be, of course, in order to reach the desired final amount on the payout date.
In addition, the type of investment selected has a significant impact on the return generated during the term and thus on the total capital. Who here z.B. If a customer chooses a fixed-term deposit with a term of five years and receives interest of perhaps one percent, he knows exactly what the guaranteed final sum will be at the end of the contract.
It is more complicated to make a precise prediction regarding the final amount if you invest instead in listed investments and savings plans based, for example, on funds, stocks or a stock index. Depending on the risk class, both high returns and high losses can be possible.
Are savings banks and credit unions still up to date?
Both are certainly not as hip and trendy as the vast majority of direct banks, which with their banking apps and online performance mainly court the tech-savvy, younger (walk-in) clientele. In a direct comparison, savings banks and Volksbanks naturally look rather old-fashioned.
Usually they have also somewhat worse conditions both with investment products and with financings and accounts. For this, savings banks and Volksbanks score points with rock-solid and personal advice.
Since these financial institutions operate a nationwide, dense branch network, many customers remain loyal to "their" savings bank and their personal savings bank advisor for life. Especially for consumers who don't want to constantly change banks and don't like to deal with financial matters, the – by the way non-profit – savings banks and Volksbanks are a real alternative to the zeitgeisty online financial service providers.