Koch was born Margarete Ilse Köhler on 22 September 1906 in Dresden, Germany. Her father was a factory foreman. In elementary school, she was known as a polite and happy child. At age 15, she started school to become an accountant. Later, she went to work as a bookkeeping clerk. Germany's economy had been ruined when Germany lost World War I, and at the time that Koch worked in bookkeeping, the economy still had not recovered.