Many parents and/or grandparents save money for their (grand) child. This can be money that the child can use to get his / her driving license. Money for a study. Or money of which the child can know for himself what he/she will do with it. In this article, we give you 6 tips on how much money you should save for your child and how to do it.
1. Determine a savings target
To determine how much to save for your child, it is helpful to have a savings goal. What do you want to do with the money, or what do you want your child to be able to do with it? By determining this, you can also estimate how much money is needed. Obviously you need much less money for a driving license than for a study, for example. Once you know how much money you want to save for your child, you can start looking at how to do this.
Most people who save money for their child do so so that they can pay for the child’s driver’s license or (part of) the study. To give you an idea of the amounts you need (on average) for this, we have collected some of these amounts for you. Keep in mind that these prices do not include inflation. You can therefore assume that these prices will be higher than these estimates in the future, for example when your child will study or get his driving license.
- Driving license – ± € 2,000
- Used car – ± € 1,200
Would you like to save for your child’s driver’s license? Then this will cost you on average between 1800 and 2400 euros. Do you also want your child to be able to buy a nice (second-hand) car? Then you will also have to reserve an amount for this.
- Tuition fees – ± € 2,060 pj
- Study books and supplies – ± € 600 per year
- Room rent – ± € 450, – pm
The prices mentioned above are estimates. In addition, a student naturally incurs other costs, such as going out, health insurance and groceries. It is up to you to choose which of these items you want to save. Many parents choose to pay a child’s tuition, books, and supplies, but not the room rental.
2. How much to save?
The average Dutch person saves somewhere between 40 and 60 euros per month for a child. This amounts to an amount of 480 to 720 euros per year. If we calculate this into 18 years of saving, then after 18 years you have saved around 8,640 to 12,960 euros together. With this your child can, for example, go to get his / her driving license, buy a car and / or pay (part of) the study costs.
How much savings for your savings goal?
How much you should save monthly (or annually) therefore mainly depends on the goal you have in mind. By simply dividing the amount you want to save together by the number of years left to do that, you can calculate how much you should put aside. You can then also convert that into the amount per month, so that you know exactly how much you should save every month.
Save from the diapers
The sooner you start saving for your child, the lower the monthly savings you will have to put aside. If you assume that you can save 18 years for, for example, a driving license or study costs, you will have to deal with (approximately) the following amounts:
- Driving license – 8.35 to 11.10 euros per month
- Study – 55.55 euros per month
- Costs study + in rooms (4-year study) – 222.25 euros per month
3. View your options
If you would like to save for your child, it is wise to look at what exactly is possible. How much money do you have each month and how much could you put aside for your child? The most convenient way to get an overview is to compare all your income and expenses. You could possibly save the amount that you have left over.
- Budgeting; everything you need to know
Save on expenses
Do you not have that much money left at the end of the month and therefore you cannot save that much? Then there are a lot of ways you could save on those expenses. For example, by saving on your groceries , on the fixed costs and on the costs for the children . On this website you can find a lot of tips to save a lot of money, so that you have more to save for your child.
Tip: Do you need help saving or saving? Then think about hiring a budget coach or check the Nibud website for useful tips.
Would you like to save more for your child than is possible with your current income? Then you can think about ways to get extra income. For example, you can look for another job, ask for a salary increase, find ways to earn extra money, or sell items that you no longer use and put that money aside for your child.
4. How to save?
If you know how much you want to save and what you want to do it for, you can look at how you want to do it. You have various options for this. For example, you can put the money in a savings account in the child’s name, which he / she can only access when he / she is 18 years old. You can also put the money in a savings account in your own name and then donate the money in one go or use it to pay for the costs.
Savings account for child
Do you open a savings account for your child? Then of course you want to choose the most convenient option for this. In that case, a savings deposit is often the most advantageous. You cannot withdraw the money you put on this in the meantime. The interest you receive on these types of accounts is often much higher than on a regular savings account.
Savings account for your child with interim withdrawals
Do you want to be able to withdraw the money in the meantime, so that you can use it for example for expensive expenses for sports or hobbies of your child? Then it is better to open a regular savings account or a child savings account.
Tip: If you save money on a child savings account, you do not have to pay gift tax on it.
Savings account in your own name
You can of course also simply save the money in your own savings account and then donate the money in one go or use the money to cover certain costs. When donating from your own savings account, take gift tax into account. You can read more about this below.
Compare conditions and interest
If you are going to open a savings account for your child, you would do well to take the time to compare the conditions and interest rates of different banks. That way you can choose the account that suits your needs and go for an account with the most attractive savings interest.
5. Consider the tax
If you save money for your child and then transfer this money to your child, it is a gift. For donations above a certain amount, your child will have to pay tax on that donation. This is definitely something to take into account when saving money for your child.
By taking into account amounts that can be donated tax-free, you prevent a (large) part of the money from going to tax. Do you save money on a special child savings account? Then you have an exemption from the gift tax.
Free annual donation
Every year as a parent you can donate a maximum of 5,428 euros without having to pay tax on it. Do you give more? Then you have to pay gift tax on that. In addition, there is such a thing as a one-off tax exemption for a gift of up to 26,040 euros per child, if the child is between 18 and 40 years old. Does the child use the money for a study that costs at least 20,000 euros per year (excluding living costs)? Then the amount that you can give once tax-free is a maximum of 54,246 euros.
Is the amount you saved in your own account for your child higher than the amount you can donate freely? In that case, in connection with the gift tax, it may be more advantageous to spread the amount over several donations.
Information about (gift) tax
There are all kinds of rules for saving money for your child. Thus, the savings for your child is to have 18 e added to the assets of the parents. If it is the case that the savings of the parents and the child exceed 30,360 (single parent) or 60,720 (parents with partner), you have to pay tax on this. More information about all applicable tax rules on savings can be found on the website of the tax authorities or Nibud.
6. Save money for a child who has yet to be born
Do you want to know how much money you need for a baby that is yet to be born, so that you can pay the first big expenses and have money on hand for the monthly costs for the little one? Then you may wonder how much money you have to save for that.
How much does a child cost per month?
A baby costs you on average somewhere between 140 and 270 euros per month. This depends, among other things, on whether it will be taken to reception and whether you will receive certain surcharges.
Costs for the birth
For a little one you need everything, including clothes, a nursery and various care products. According to the Nibud, the costs for a baby release are around 630 euros per month. You can save a lot on this by buying cheaper furniture or second-hand furniture. In addition, you also have to deal with costs for a pram, car seat and, for example, a baby monitor.
Cost for a child
In addition to these costs, you will also have to deal with costs for childbirth, maternity care and a maternity package. On the Nibud website you can find a complete overview of all costs that come with a baby. This way you can calculate exactly what you will have to save for the arrival of your little one. On the Nibud website you will also find useful tools to calculate whether you can still make ends meet with the arrival of a small one and you can find information about any allowances.
In this article you have found useful tips for saving money for your child. First of all, it is smart to see what you might miss every month, how much money you would like to save exactly and how you will do that. You can then determine what type of saving is most convenient for you. Are you having problems or do you need advice? Then you can always request an advice from your bank or a financial advisor.