A savings account for kids—is it worth it?
Children are a blessing—and an investment at the same time. In Germany, parents spend an average of 763 euros per month on their children, which adds up to nearly 165,000 euros by the time they turn 18.
Expenses vary widely: While the average monthly cost for children up to age six is 679 euros, the cost for 12- to 17-year-olds rises to 953 euros. The older children get, the higher the financial demands become. It’s no wonder that many parents start saving money for their children’s future early on. But which investment option is best?
The best financial investment depends on your savings goals and the capital you have available
The choice of a financial investment depends heavily on your savings goals: Do you want to set aside money for your child’s education, college, or a trip around the world? Or are you focusing on more short-term goals, such as a driver’s license or a first car? The investment term also plays a role. Long-term savings goals require different products than short-term ones.
Many parents, grandparents, and godparents regularly set aside money or give monetary gifts to their children, grandchildren, and nieces and nephews to help them build a solid financial foundation. There are numerous ways and tips for teaching children about money from an early age—such as through children’s accounts with no account maintenance fees. So, learning to manage finances responsibly starts early.
Table: Average monthly expenses for children in Germany (Statista, 2023)
| Alter des Kindes | Durchschnittliche monatliche Ausgaben |
|---|---|
| 0–6 Jahre | 679 € |
| 6–12 Jahre | 801 € |
| 12–17 Jahre | 953 € |
Source: Statista (opens in new tab)
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Short-term goals – driver's license, car, and more
Even as the mobility transition continues, a car remains indispensable for many young people, especially in rural areas. The cost of obtaining a driver’s license is around 3,000 to 4,000 euros—and can be even higher in some regions. Added to this are the costs of purchasing a car, which can vary widely depending on the model, condition, and current market offers. A good used car often starts at around 5,000 to 10,000 euros.
In addition, your children will need a new computer or a modern laptop every so often, which can cost up to 1,000 euros or more. By starting to save early, you can spread out these financial burdens and gradually build up the necessary funds through small monthly contributions, helping your child achieve their dream of mobility and a bright future.
Long-term goals – college, vocational training, and more
Going to college or pursuing vocational training is expensive. Tuition, textbooks, and the cost of living in a new city can quickly add up to a hefty sum. Spending time abroad during or after your studies may also require additional financial resources, but it offers invaluable experiences.
A financial foundation is extremely helpful for young adults. Education savings are ideal for these long-term goals. Monthly savings contributions or additional deposits on special occasions provide a flexible foundation to give your children a good start in their professional lives. With the right planning, you can also give them the freedom to realize even their biggest dreams. This typically includes buying their first home and covering the costs of furnishing it.
In whose name the account should be opened
If you want to save money for your child, it makes sense to open a children’s account or brokerage account in their name before making your first deposit. This has several advantages: The money saved belongs to the child; parents or legal guardians are only allowed to manage it.
In addition, every child is entitled to a tax-free savings allowance of 1,000 euros per year starting at birth. Investing for children is an attractive way to manage capital gains in a tax-efficient manner.
Benefits of Investing on Behalf of a Child
- Standard deduction for savers: Winnings of up to 1,000 euros are tax-free.
- Financial literacy: Children learn about money and investing at an early age.
- Wealth building: By starting early, you can accumulate significant amounts over the years.
Saving for children and grandchildren – there are many options
There are numerous options for saving money for children and helping to secure their future. Ultimately, choosing the right investment vehicle for young people depends on individual goals, the planned investment horizon, and personal risk tolerance. From traditional savings accounts to modern ETF-based annuities, there is a wide range of options available that can be combined as needed. Here is an overview and comparison:
Savings accounts and passbooks for children
Many parents, grandparents, and guardians are familiar with traditional savings accounts at a savings bank or another established financial institution with physical branches. These accounts offer security, as deposits are protected by law. They are also easy to use, and the money can generally be withdrawn at any time. A savings account may seem like a practical option, especially for small amounts and short-term savings goals.
However, interest rates are extremely low these days—or even close to zero—so the money you save barely grows. The biggest drawback is the gradual loss of purchasing power: over time, inflation reduces the value of your savings, which greatly limits the benefits of a savings account.
Call money and time deposits – a good idea for children?
A demand deposit account offers flexibility, as the balance is available at any time and earns a slightly higher interest rate than a savings account. It is particularly suitable for short-term savings goals or as an emergency fund. Fixed-term deposit accounts, on the other hand, offer higher interest rates but require a fixed term during which the money is not available.
While both options offer security, they are not very attractive given the current low-interest-rate environment, as the potential for returns remains limited and the yield is usually below the inflation rate.
Savings plans and savings bonds
Savings plans allow you to invest small amounts in funds on a regular basis, offering the prospect of long-term wealth accumulation even with modest monthly contributions. A savings bond, on the other hand, is a fixed-income investment with a fixed term.
However, both options have limitations in terms of returns: while an ETF savings plan, for example, is subject to market risks, savings bonds offer little protection against inflation. They are less suitable for long-term goals than financial products such as stocks or an ETF annuity, as their potential returns remain limited.
Securities accounts without a savings plan
A Stock portfolio for children allows for investments in stocks, mutual funds, ETFs, and similar products, which can generate high returns over the long term. It is ideal for parents who want to start building wealth early on.
Despite the attractive growth opportunities, the risk of price fluctuations should not be underestimated. However, long-term investments can often offset such fluctuations, making it possible to build solid wealth and even fulfill a special wish for your children. It is important to note that these types of investments involve brokerage fees. A broker is a person, institution, or platform that trades on the stock market on your behalf, as this requires a special license.
An Alternative to a Children's Investment Account – ETF Annuity Insurance
An ETF pension plan combines the advantages of ETFs for Kids with the security of a traditional pension plan. ETFs, i.e. Exchange-Traded Fundsare exchange-traded funds that invest in a wide range of securities, thereby enabling broad diversification. This reduces risk while offering long-term return potential.
ETF insurance not only offers long-term return potential through investments in broadly diversified markets, but also a high degree of security and flexibility in terms of contribution structures. Whether through regular payments, lump-sum contributions, or payment breaks—this type of investment adapts to parents’ individual needs. In addition, investors benefit from tax advantages and a stable foundation, even during uncertain market conditions.
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Benefits of ETF Insurance
Given its many advantages, an ETF pension plan is an excellent way to build wealth for your children:
- Free consultation: Get a no-obligation consultation to address any questions you may have. Our experts will take the time to explain the best options for long-term investments.
- Flexibility: Contributions, payment breaks, and lump-sum payments can be adjusted at any time. This allows you to flexibly tailor your investment to your current life situation.
- Capital protection: Even when financial markets fluctuate, your capital remains protected thanks to broadly diversified investments and low-risk strategies.
- Additional security: Deposits are additionally protected by the insurance structure, which means that the principal is preserved even in extreme market conditions.
- Right to decide from age 18: You retain control over the investment even after your child turns 18. This means the assets remain under your control.
- Tax benefits: Long-term savings resulting from tax benefits make this type of investment particularly attractive.
- Saving conditions: The framework conditions for your investment remain stable, even in the event of changes in the law.
- Long-term planning: With an ETF savings plan, you can not only save flexibly, but also set aside funds for specific goals such as your child’s college education, vocational training, or their first personal projects.
Example: With a return of 14.92% in 2023, an ETF-based insurance product demonstrates its enormous potential. This return stems from a combination of broadly diversified investments and low management fees.
It offers investors a stable foundation, even during periods of market volatility, and ensures attractive long-term capital growth. This is an excellent option, particularly for families, to build wealth effectively and securely for their children’s future.
FAQ – Frequently Asked Questions
This topic is of interest to many of our readers, so we’ve put together a brief overview of the answers to some frequently asked questions.
Which is better, a savings book or a savings account?
A savings account typically offers better interest rates than a savings passbook, which undoubtedly makes it more attractive at first glance. However, neither option is very profitable these days, as interest rates often fail to keep pace with inflation. These investments are therefore only suitable to a limited extent for long-term goals, as they offer little potential for growth and the saved capital loses purchasing power.
How much money should you save each month for a child?
That depends on your goals. For long-term savings goals, monthly contributions of 50 to 200 euros are a good starting point. This amount provides enough flexibility to cover both your child’s small and larger wishes.
Even with regular contributions, you can save a substantial amount over the years—money that can later be used for education, college, or other important life milestones. It is crucial to start saving as early as possible, ideally right after the child is born.
What's the best way to save for my child?
ETFs and ETF-based annuity insurance plans offer an ideal balance of returns and security. ETFs allow investors to diversify broadly across global markets, thereby minimizing risk and maximizing growth potential.
ETF insurance products combine these investment opportunities with additional safeguards, such as capital protection, and also offer tax advantages. This makes this investment vehicle particularly well-suited for achieving both short-term and long-term savings goals for children while building a stable financial foundation.
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Conclusion – Saving for Your Children: Which Investment Option Is Really Worth It?
Choosing the right investment vehicle depends on your goals. A savings account offers security but yields very little return, which makes it unattractive for the long-term goal of financial independence. Securities accounts and ETFs, on the other hand, offer better potential returns and the opportunity to invest in a broadly diversified portfolio, but they can be subject to significant losses during market fluctuations.
ETF pension insurance, in particular, stands out for its flexibility, tax advantages, and capital protection. It offers the option to build wealth over the years while adapting to changing life circumstances, making it an ideal choice for families.
“Know what matters: Plan your family’s financial future now.”
