The financial future of our children is one of the most important tasks for parents. Traditional forms of saving such as savings accounts have lost their appeal due to the persistently low interest rates and offer hardly any opportunities for growth. This makes it unlikely that they will be able to finance their first car, driving license or university education, let alone a solid pension plan.
Modern alternatives such as junior custody accounts and ETF pension insurance are becoming increasingly important. They enable long-term asset accumulation with attractive potential returns while offering flexibility and security for the next generation.
We'll help you find the right investment for your child!
- An additional $25,703 per child, thanks to our modern ETF strategy
- Find the perfect ETF investment for your child in a 30-minute video conference from the comfort of your own home.
- Sit back and watch your child's assets grow – our experts will take care of the rest.
What is a Junior Depot?
A junior custody account is a securities account specially designed for children, which is opened in the child's name. It offers parents, grandparents or godparents the opportunity to invest long-term assets in the form of shares, funds or ETFs.
This form of investment introduces children to the responsible handling of money at an early age and teaches them important knowledge about saving and investing. Junior custody accounts are particularly attractive because they usually have low fees or are even free of charge, which makes it much easier for children to start investing.
Are children allowed to own securities?
Yes, children are allowed to own securities, but the management of the custody account for children is in the hands of their parents or legal guardians, who act as trustees, until they reach the age of majority. From their 18th birthday, the child is given full control over their securities account and assets.
Advantages of a junior depot
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Early asset accumulation: The compound interest effect can be optimally utilized through long-term investments.
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Tax advantages: Children have their own tax allowances, which means that capital gains up to a certain amount remain tax-free.
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Fees: Many providers waive the custody account fee for children and, similar to current accounts, offer the prospect of free custody account management.
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No independent decisions: Children cannot make their own transactions before their 18th birthday. All actions must be in the best interests of the child.
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Education: Children learn how to handle online banking, money and investments.
Disadvantages of a junior depot
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Investment risks: Without sufficient knowledge, wrong decisions can be made.
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Restricted availability: The money is tied up until the child reaches the age of majority.
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Complexity: Investing with the help of suitable investments requires time and expertise.
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Transfer of the custody account: On their 18th birthday, the child automatically takes over the power of disposal.
Alternatives such as ETF savings plans or ETF pension insurance can be more profitable and easier to use.
Shares, ETFs and co. as attractive investments
Investments in shares and ETFs offer high potential returns in the long term. An ETF (Exchange Traded Fund) is an exchange-traded fund that tracks an index such as the DAX or the MSCI World.
ETFs allow for a broad diversification of capital as they invest in numerous companies, thus reducing risk. ETFs for children are also cost-efficient and flexible, making them a popular choice for long-term wealth accumulation.
How does a Junior Depot work?
A custody account for children is opened in the name of the child, with the parents or legal guardians acting as legal representatives. After submitting all the necessary documents, such as a birth certificate and proof of legal representation, investments can be made in securities such as shares, funds or ETFs. A securities savings plan or a one-off investment is also possible.
Manage with the Junior Depot
A junior custody account is managed by the parents or legal guardians until the child reaches the age of 18. They are responsible for deciding on deposits, investments and the selection of asset classes.
It is recommended to pay in savings amounts of a few hundred euros per year in regular monthly installments from birth and to diversify the portfolio broadly in order to reduce risks and at the same time maximize the opportunities for returns in the long term. With 1,000 euros a year, a considerable savings rate will accumulate over the years.
Custody account in the name of the child - tax advantages
The advantage of opening a Direkt-Depot-Junior in the child's name is that the child's tax allowances can be used. This means that investment income when saving for children remains tax-free up to a fixed amount. This leads to an optimized net return and enables more efficient asset accumulation for the child's future.
Junior depots - a good option for the future
Junior custody accounts for children are an excellent way to get an early start on long-term wealth accumulation for children and young people. Not only do they promote financial education by teaching children how to handle money and investments, they also offer tax advantages through the use of tax-free allowances. However, parents should not ignore the potential risks and the additional administrative burden.
We'll help you find the right investment for your child!
- An additional $25,703 per child, thanks to our modern ETF strategy
- Find the perfect ETF investment for your child in a 30-minute video conference from the comfort of your own home.
- Sit back and watch your child's assets grow – our experts will take care of the rest.
Guide - Investing for children
In addition to junior deposits, there are many other options for building up assets for children. Although traditional savings accounts are one of the safest forms of investment, they are hardly profitable due to low interest rates.
A promising alternative is ETF pension insurance, which combines the potential returns of ETFs with the security of insurance, offers tax advantages and enables flexible asset accumulation.
Other options include an ETF savings plan, fixed-term deposit accounts or special children's accounts, which can serve as an introduction to financial education. Each of these options has advantages and disadvantages that should be carefully weighed up.
When does an insurance policy perform better than a custody account?
ETF annuity insurance policies are an attractive alternative to junior custody accounts, as they often offer lower costs and higher potential returns. With average annual returns of 5-7%, they enable sustainable and efficient asset accumulation for children.
The tax advantages are a major plus point: The income is usually not taxed until it is paid out and often at a lower tax rate, which increases the net return. They also offer flexible payout options that can be individually adapted to the life phases of the child.
Last but not least, it is an advantage that ETF pension insurance policies can be managed by legal guardians beyond the age of 18. This ensures that the saved capital can be allocated to individual objectives without being squandered beforehand. Some providers also offer free advice.
The combination of attractive returns, tax efficiency and financial security makes investing for young people one of the best options for long-term wealth accumulation.
FAQ
Here we answer the most frequently asked questions about investing for children and provide helpful tips for successful wealth accumulation.
Can I open a custody account for my grandchild?
Yes, grandparents can open a custody account for their grandchildren, either in their own name or directly in the grandchild's name. This allows them to save assets over the long term and take advantage of tax benefits. However, it should be noted that many online brokers stipulate a minimum savings rate. It is also important to ensure that the provider has the necessary certificates.
What is the best way to invest money for children?
ETF pension insurance and ETF savings plans are attractive options for long-term wealth accumulation for children. They offer flexible investment opportunities, tax advantages and enable sustainable growth of the invested capital.
How much money should you save each month for a child?
This depends on the individual's financial possibilities. Even small amounts, invested regularly, can increase the savings plan rate over the years and lead to considerable assets. A junior custody account comparison or a test will provide information on this.
Who owns the money in the children's account?
With an account or custody account in the child's name, the money legally belongs to the child. The parents hold it in trust until the child reaches the age of majority.
Conclusion
A junior custody account is a good way of introducing children to investing and building up long-term assets. However, it requires specialist knowledge and time to manage. An ETF pension insurance policy with free advice offers an attractive alternative with tax advantages, low administration costs and flexible payout options.
It combines the potential returns of the capital market with the security of a pension insurance policy, comes with tax advantages and allows you to structure the payments flexibly. Another plus point is that you retain the right to decide on the investment even after your child's 18th birthday
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Ogün
December 02, 2024
We feel that we are in good hands with Oskar 🙂 He explained everything to us in detail and took the time to answer all our questions. Top advice! I am happy to recommend him!
