A Quick Guide to Financial Support for Young Parents
Having children is a wonderful, but expensive, journey. What support is available?
Raising children is one of the most amazing experiences in a person’s life. From the first baby steps to the last day of school, your little one will have a huge impact on your life and give you countless memories to look back on. Of course, this comes with a great deal of responsibility – and that starts with ensuring your financial security. This article describes some of the numerous ways the German government supports young parents, and particularly those with a relatively low income.
Children are expensive – we’re not kidding!
With food, clothing, toys, books and leisure activities, raising a child involves many different costs. And as your child gets older, the costs tend to get higher; think branded clothing, new smartphones and other gadgets. According to the Federal Statistical Office of Germany, parents spent an average of €660 per month in 2013 to raise a single child up to the age of 18. That adds up to a total of around €140,000 over 18 years! But while this sounds like a staggering amount of money, the German government does offer various forms of financial support to help parents cope with the costs.
Kindergeld: The most important benefit for parents
One of the most important forms of support for parents is the child benefit (Kindergeld in German). To receive this, you need to apply to the Family Benefits Office (Familienkasse). There are a few requirements to receive this benefit, such as being an EU citizen or having a valid residence permit for Germany. As of 2020, the monthly payment is set at €204 for the first and second child, €210 for the third child, and €235 for every additional child after that. So if you had three children, you would receive a total of €618 per month (204 + 204 + 210). Only one parent receives this benefit, so you and your partner should decide who will receive the money.
You will receive Kindergeld at least until your child’s 18th birthday. If your son or daughter is registered as a job-seeker, Kindergeld continues to the age of 21. The payment even continues until your child’s 25th birthday if they are studying, doing an apprenticeship, or taking part in voluntary service.
Tax relief: An alternative to child benefit
If you complete your tax return each year, you may be able to receive a tax benefit for having children (known as Kinderfreibetrag in German). While you have to apply for Kindergeld, you can receive the tax benefit automatically. The tax office will check which of the two options is better for you and adjust accordingly. If you receive the Kinderfreibetrag, you will no longer receive Kindergeld. For most parents, Kindergeld is the better option of the two.
Other benefits for parents:
Elterngeld: This parental allowance is paid for up to 14 months to compensate for financial losses during parental leave. In its basic form, it pays between €300 and €1,800 a month, depending on your net income. For example, if you had an average net monthly income of €1,700 before taking parental leave, do not have any other children, and do not have another source of income during your parental leave. In this case you would receive around €1,050 per month in Elterngeld. To receive this benefit, you must have a residence permit in Germany. A student visa or a limited-time work permit are not sufficient.
Kinderzuschlag: If you receive Kindergeld and have a relatively low income, you could be eligible to receive a supplementary child allowance of up to €185 per month. Like Kindergeld, you need to apply to the Familienkasse to receive this benefit.
Entlastungsbetrag: Single parents receive further tax relief from the government. To receive the Entlastungsbetrag, you need to file your tax declaration. This means that the first €1,908 of your annual income will not be taxed. Due to the coronavirus pandemic, the government has raised the tax-exempt amount from €1,908 to €4,008 for 2020 and 2021.
Disability insurance: Protection for the long term
As you can see, raising a child is a long-term investment. In addition to financial support from the state, you and your partner will still rely on your own income. To secure this income even if injury or illness prevent you from working, we recommend getting disability insurance. That way, you can ensure that you can give your children the best upbringing possible, no matter what happens.
To ask an expert about how to secure your financial future, arrange a free consultation.
