Invest money for children: savings book or shares?

Invest money for children: savings book or shares?

Invest money for children: savings book or shares?

Parents usually start looking for investment opportunities for their offspring after the birth of their child. Up to the age of majority, a child costs around 125,000 euros according to our calculation. After graduating from school, you have to finance your studies or training as well as your first home and car. In times of low interest rates, it is not easy to find the right form of investment.

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Savings accounts generate little return

Parents or grandparents should start saving early enough to give the children the necessary financial support. In addition, the investment for children must be as safe as possible. The still popular savings accounts fall under the statutory deposit guarantee scheme, but only achieve low returns. The money saved usually loses real value. For this reason, investment opportunities that involve a certain risk but generate significantly higher returns should also be considered. With a mix of high-return and low-risk investments, the children’s financial future can be better secured. Sufficient risk diversification is recommended to protect against losses. For research, we recommend independent and reputable sources such as, or also Receiving valuable information makes it much easier for children to make the right investment. Traditional investment options include fixed or overnight accounts. Before a certain amount is paid in monthly, you should look for an offer with good interest rates. However, an investment in call money accounts is not really worthwhile even in this low interest rate phase. Interest rates quickly drop to below 0.5%.

Fund savings plans and broadly diversified equity funds

If the saved credit is shifted to a fixed-term deposit account with higher interest rates every 2 years, a notable credit is created over time. However, the money in a time deposit account is not available for the entire term. Another alternative to investing in children is the bank savings plan. Savings plans offer the advantage of increasing interest rates. With some savings models, a bonus is granted in addition to the interest at the end of the term. Higher returns can be achieved with a fund savings plan, but parents should be willing to take a certain amount of risk. Financial experts recommend broad-based equity funds or exchange-traded funds (ETFs) as investments for children. The ETF traded on the stock exchange tracks a stock index similar to the DAX. Compared to actively managed funds, ETFs have fewer fees. Like stocks, ETFs are subject to fluctuations in the value of the stock exchange and can also lose value. In order to keep the risk of loss as low as possible, the capital should be invested for a longer period and distributed to different funds. With an investment period of 10 years, fund losses can be offset. Funds invested in equities have achieved an average annual return of 6% since 1996. It is therefore recommended to start investing in children as early as possible. If small amounts are regularly invested in infancy, decent returns can be achieved. Saving is worthwhile even if no large sums can be paid in. Smaller amounts also generate interest gains and returns. Safe savings can be made on a child’s account. Children’s financial assets are protected by law by setting account ownership in the child’s name.

Learn to handle money responsibly

As children are only of limited legal capacity, parents as custody officers have to consider a few things when opening an account. When opening a daily allowance account for children, a declaration of consent from the legal guardian must be completed beforehand. Most banks are expected to have parents legitimize their parenthood by submitting a copy of the birth certificate. As soon as the children’s account is opened, any monetary gift that the offspring receives from relatives, godparents or friends can be paid into this account. A children’s account can be managed in the form of a savings account or a current account and managed by the parents. At some banks, children get their own bank card from the age of seven. Special rules apply to child accounts. A children’s current account must always be kept in the credit, an overdraft of the account is excluded. Banks are not allowed to charge account maintenance fees for child accounts. Fees may only arise when a prepaid credit card is issued. With their own children’s account, children learn how to handle money responsibly at an early stage. Children may only dispose of the credit on their own account when they reach the age of majority. The parent or guardian manages the account beforehand. Parents who are worried that their 18-year-old child will spend all the money on useless things or waste them all at once can agree on a payment plan (highly recommended!). This means that the savings are only available in certain installments. The installment agreement can still be made with the bank if the child is already 17 years old. Grandparents who want to open an account for their grandchildren need the authority of the child’s parents. Single parents need proof of sole custody for their offspring to open an account.

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Christina Cherry
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