ETF for children and grandchildren 2026 – Investing money for the next generation
Driving licence, education, university, car – there are some wishes that parents want to fulfil for their children. These goals can be more easily achieved if parents start saving for their children early on. The days of the classic savings book are long gone. But how exactly can you save as a parent today? Is an ETF worthwhile for your children? In this article, you will learn why an ETF is an excellent investment opportunity for children and how you can create a portfolio.
In brief:
- An ETF helps you achieve future financial goals for your children.
- Start as early as possible to enable your children to get their driving licence, vocational training or go to university with low monthly payments.
- The power of compound interest helps you build wealth over a long period of time and generate attractive returns.
- These investments are worthwhile for your offspring, depending on the circumstances.
- You should consider the following aspects when setting up a custody agreement for your son or daughter:
That’s why you should save for your children.
Especially when your children get older, expensive wishes can arise: Your children want to start an apprenticeship or a university degree and need money for their first apartment. Or they need a driving licence and then their own car.
Parents and grandparents want to support their children in realising their own wishes in the best possible way. One way of doing this is to start saving for children and grandchildren at an early stage. This way, a financial basis for the offspring can be built up from an early age.
Saving early can take a lot of the pressure off as a parent: you plan for financial goals and start saving money early. This means you don’t have to worry as much about how to achieve these goals financially later on.
What’s more, you can show your children how important finances are from an early age. Teach your daughter or son how to handle money responsibly and save for long-term goals. If you manage to establish this knowledge early on, you can provide your children with significant support. They will be able to master financial matters in the future.
Another advantage of saving for your children’s future is the compound interest effect:
- For goals such as these, investments with a long investment horizon are suitable.
- Those who start saving as early as possible have many years to benefit from the compound interest effect and grow their assets for their own offspring.
Investing money for children – traditional investments
The numerous investment options available, with their different advantages and disadvantages, can make the subject of finance seem chaotic and complex. In addition, investments for children have special requirements that should be considered. But what should you invest in to make it worthwhile?
In principle, a financial investment for the next generation should take various aspects into account. Depending on the age of the child, the corresponding asset should offer flexibility, be low-priced and offer opportunities for returns to benefit from longer periods of time. There should also be a certain level of security.
Time deposits or call money for the next generation
The problem with investments like these is the low interest rates. The money cannot be easily multiplied. This way, you also cannot benefit from the compound interest effect through longer periods of saving.
One advantage of instant access savings accounts is that they are readily available. With the help of an instant access savings account, adolescents can learn to manage their pocket money and budget for themselves. However, interest rates can change constantly.
If the money is not needed for a while, a fixed-term deposit account is a suitable option. Interest and term are fixed. One disadvantage is that the money is only available again after the term has expired, and flexibility is lower in this way.
Time deposits and instant access savings accounts can also be worthwhile. They are the better choice, for example, when the investment horizon is relatively short. If your child is already 15 years old and needs access to their own money, an instant access savings account is a good choice. If money is to be set aside for a driving licence in a few years’ time, a time deposit account is more suitable.
Good to know:
Due to the low interest rates, it is important to only invest money in fixed-term deposit accounts for a few years. Otherwise, interest rates may rise in the future and you may regret having locked your money away at low rates.
Building savings contracts and insurance
These assets were also very popular in the past, but they no longer offer much interest. In addition, there may be high fees or administrative costs. You should be aware of additional costs, as they can reduce your return.
Attention!
If you do decide to take out a building society savings contract, we recommend that you compare the different providers online to find the best offers.
Invest in ETFs? Wealth accumulation made easy
ETFs are an attractive way to build a nest egg for your child. This asset class makes it comparatively easy to participate in the stock market and benefit from potential returns.
The basics and how an ETF works
You may be concerned about investing money for your offspring in asset classes like ETFs based on stock investments. Aren’t stocks dangerous? Compared to investments like money market accounts, stocks are riskier. Risk and return are closely related: there is no return without risk. Investments like this are subject to market fluctuations.
However, risks like these are particularly easy to offset in exchange-traded funds. As an investor, it is up to you to reduce the risk in your portfolio. ETFs are considered to be particularly diversified: some of them invest in several thousand stocks and can offset fluctuations in individual stocks much more easily.
- You can optimise your risk through diversification.
- Invest in different asset classes, sectors and countries
- A long investment horizon also helps to minimise risks and smooth out fluctuations.
High inflation rates make it increasingly difficult to find attractive investments. Stocks or ETFs are a good choice because of their comparatively high returns, as they can offset high inflation and increase wealth over the long term. For long-term financial goals, inflation can become problematic if you invest in assets with particularly low interest rates.
An attractive ETF for beginners
For example, an attractive ETF for beginners is an index based on the MSCI World. This contains over 1,600 companies and invests in numerous different industrialised countries. With just one ETF, investors can diversify broadly, reduce their risk and generate returns.
The long investment horizon is particularly important in connection with this investment:
- An exchange-traded fund is worthwhile if your children are still very young.
- This way, you can benefit from a mix of ETFs with high returns and a compound interest effect.
- Interest earned is reinvested and used to generate further returns.
- The amount invested is increasing, which means that more money can work for you.
Since this is an investment on the stock market, it is important that you have a certain flexibility when it comes to the time of payment of your investment. If you need the money at a certain point in time, you may have to sell when interest rates are low. Therefore, keep an eye on your goals and prices and avoid selling at low prices.
ETF savings plan or lump-sum investment?
Once you have decided on an exchange-traded fund, you may wonder whether to buy an ETF or set up a savings plan.
Advantage savings plan
A savings plan allows you to invest in an exchange-traded fund at regular intervals. For example, you set up a monthly or semi-annual savings plan. A fixed amount is automatically debited from your account at the end of the period and invested in your asset class.
To do this, you can choose an exchange-traded fund that is eligible for inclusion in a savings plan and set up a standing order or direct debit. A particular advantage of a savings plan is that you can invest small amounts. In most cases, you can invest automatically with as little as 1 to 25 euros.
Saving plans are particularly flexible: you can increase or decrease the savings rate as you wish. If you need to, you can quickly and easily pause the savings plan. For example, if your child receives money from relatives for their birthday, you can simply increase the savings rate for the coming month and invest the money.
Setting up a savings plan is particularly worthwhile if you want to save consistently for a financial goal over a longer period of time. Another advantage of using a savings plan is that the timing of the investment is not important.
Advantage of a one-time investment
The situation is different if you are interested in a one-time investment: Here you should try to buy as cheaply as possible so as not to reduce your future return. Fluctuating prices can play a decisive role here. Poor entry times can be offset with a long-term investment horizon.
However, a one-time investment also has an important advantage. If you have already set aside a larger sum for your child that is to be invested, a one-time investment is suitable. This way, your money has more time to benefit from compound interest and work for you and your child.
| Savings plan | One-off investment | |
| Advantages | – Small amounts can be invested – Automatic savings – High degree of flexibility – No importance attached to the time of entry (cost averaging effect) – Constant asset growth | – Exploitation of the compound interest effect with high deposits – Favourable entry point can be exploited |
| Disadvantages | – Tied to fixed times – Not every exchange-traded fund is suitable for a savings plan | – Risk due to poor entry timing – A large amount should already be available |
ETF for children: open a securities account?
A securities account allows you to manage and store securities. This refers to the storage of stocks, funds, ETFs or bonds. Only those who have a securities account can trade in securities. You can create a separate securities account for your daughter or son, independently of your portfolio.
Ideally, you should be able to manage your portfolio for free so as not to burden your returns with additional costs. Also, make sure that the fees for buying and selling your exchange-traded funds are low. Ideally, you should first look for your top ETF and then find a suitable bank or broker.
Good to know:
Some banks offer special children’s accounts. These usually have favourable conditions. It is worth doing an online comparison to find a good-value version. Many of these banks allow you to open a securities account for your offspring without you being a customer of the bank yourself.
If you decide to set up a children’s account, make sure that the conditions remain favourable when your child comes of age. For example, if you save in an exchange-traded fund with the intention of building your child a house, your offspring can continue to save in the exchange-traded fund themselves, even after they come of age.
When deciding on a deposit, be aware of the following costs:
- Securities account fees: Many banks or brokers offer free securities account management.
- Order fees: The offers differ, especially with regard to the establishment of savings plans. A savings plan is often cheaper than investing a single amount.
Documents required for a children’s deposit
The documents you need to open a securities account also depend on whether or not you are already a customer of the bank in question. If you decide on a new broker, some personal data, your ID card or passport and your tax identification number will be required.
Single people and those who are not married must be able to show that they have custody of the child in question. Some banks require married people to present a marriage certificate, but these rules may vary.
A birth certificate, some of which must be officially certified, is also required to request a deposit for the child. Often a copy is sufficient, or the child’s ID card or passport.
Good to know:
Incidentally, you can only set up a deposit for a child if you are the legal guardian. Grandparents are not normally able to set up a deposit for their grandchild.
Deposit for your child – don’t forget the tax
If you have set up a custody account for your offspring, the custody account belongs to your offspring. Only invest money that you do not need in the long term and that your son or daughter can use in the future. You are responsible for managing the money until your offspring comes of age.
These rules are important when we look at the issue of tax. In principle, investments are subject to various taxes, which are usually collected when the investment is sold at a profit:
- Capital gains tax in Germany of 25 per cent
- Church tax may apply
- Solidarity surcharge
However, you can set up a saver’s allowance, which for singles is 1,000 euros per year. For married couples, the amount is 2,000 euros. Investment income, i.e. profits from stocks and dividends, are tax-free up to this amount.
If you have set up a separate account for your child in their name, they have their own saver’s allowance. Here, too, an allowance of €1,000 would apply, which would thus be tax-free. In this way, it would be possible to make more profit without having to pay the flat-rate withholding tax.
Good to know:
Benefit from the saver’s allowance of €1,000 per year. To take advantage of this, simply request an exemption order from your bank or broker.
Conclusion: invest in ETFs for children and build up a fortune with peace of mind
The older your children get, the more expensive it can be to fulfil their wishes: their own car, their own apartment so that they can study or train. As a parent, you can start putting money aside for these wishes early on, and in this way you can help your children to achieve their financial goals in the most relaxed way possible.
Depending on the purpose, different investments are suitable. If your child is older and should have access to the money, a call money account is suitable. This has the advantage of availability and enables your son or daughter to learn how to handle money responsibly. If you want to invest a sum for a short period at a fixed interest rate, you could consider a fixed-term deposit account.
If your child is still very young and their aspirations are still a long way off, a children’s ETF could offer an attractive investment opportunity. These assets allow you to generate high returns, invest small monthly amounts and offset inflation. This way, you can benefit from compound interest and optimally support your offspring in realising their aspirations.
When setting up a securities account for your child, you should make sure that it is free of charge and has low fees. Find out more about the topics ‘How safe are ETFs?’ or ‘Best risk-free investment’ here!
FAQ – Frequently asked questions about ETFs for children
