In the past, investments for the offspring were usually made in the form of a savings account or building loan contract. Those days are over. In the face of meager returns and high inflation rates, parents and grandparents are increasingly investing in securities. But which child depots are recommended?
Those who want to invest money for their children only have a few interesting options today. In view of low interest rates and horrendous inflation rates, investments in the capital market are usually the best combination of return and risk at the moment. This applies not only today, but also in the long term.
In contrast to fixed-interest investments, the balance can also decrease in between, and even significantly in the case of risky investments. With a long investment horizon (e.g. from birth to the 18th birthday), this can be easily overcome, as there is enough time to compensate for price fluctuations.
If you want to invest in the stock market, you need a securities account. And if you want to invest for your children, you need a children’s custody account: the offspring’s money is invested in their name and is separate from the parents’ assets. If they get into financial difficulties, the child’s savings are safe from creditors. Another advantage: If the parents generate capital income that exceeds the current annual allowance of 801 euros (1,602 euros for married couples), taxes can also be saved with a child custody account. It must be noted, however, that the offspring can spend the money as they please after their 18th birthday.
Apart from that, a good children’s depot must meet similar criteria as an adult depot. Nevertheless, some special features apply. FMH-Finanzberatung therefore analyzed the market on behalf of ntv and searched for the best children’s depots.
First of all, the depot costs play an important role. Ideally, a children’s custody account should be free of charge and the fees for buying and selling securities should be as low as possible. But the minimum monthly amount for the savings plan also played a role in the evaluation.
Anyone who opts for actively managed funds should also know which funds are offered with a discount on the front-end load – and how much of the actual savings ends up in the bank instead of being invested.
Anyone who wants to save these costs is well advised to use ETF funds. ETFs are exchange-traded index funds that do not require expensive fund managers. They always perform like the stock index they copy. They can also lose value in the meantime. The longer it takes until the child turns 18, the more likely it is that any price crashes will level out again.
The top positions in the FMH evaluation are occupied by the free custody accounts from FFB, ebase, flatexDEGIRO Bank and Finvesto. You can also save small amounts (10 or 25 euros per month) and, with the exception of Finvesto, offer a 100 percent discount on all funds with a task surcharge. Last are the offers of Postbank and Commerzbank. They fall well behind the competition – partly because of the low discounts and the comparatively high transaction fees.
(This article was first published on Tuesday, June 14, 2022.)
