Why an ETF savings plan for children/grandchildren makes sense
While a traditional savings book barely delivers any increase in value due to the currently low interest rates (certainly not once inflation is taken into account), ETFs invest in broadly diversified equity and bond markets worldwide. Equity ETFs are particularly well suited for a savings plan designed for the long term. Historically, the global equity markets have achieved average annual returns of around 8 per cent over long periods. This means that an equity-based ETF savings plan offers the chance of a considerably higher final wealth than would ever be possible with a conventional savings account.
Another advantage of an ETF savings plan for your child is the usually very long investment horizon. If you start the savings plan right after your child is born, you can, for example, invest regularly over many years up until their 18th birthday. The long time horizon plays into your hands when building up wealth, because short-term fluctuations on the stock markets lose their significance over such a long period.
In addition, an ETF savings plan is an excellent way to introduce your child to the topic of money and investing in a playful way.
How does an ETF savings plan for children work?
An ETF savings plan is an automated form of investment. First, a custody account is opened and a settlement account is defined, one or more ETFs are selected, the monthly savings amount is set, and the money is then automatically invested month after month. In many cases, this is already possible with small amounts of money – at quirion, for example, from as little as 25 euros a month.
The advantages:
- Regularity: Month after month, the amount of money you have specified is automatically invested.
- Flexibility: You can adjust or pause the savings amount at any time or pay in additional one-off amounts. This makes it easy to directly incorporate cash gifts from grandparents or other relatives, for example.
- Broad diversification: With a broadly diversified ETF portfolio – as at quirion – you invest in hundreds or even thousands of companies worldwide.
This means: Your child benefits from global economic growth opportunities and rising corporate profits, which usually drive up share prices, without you having to pick individual stocks or constantly look after your custody account.
Invest yourself or have it invested for you?
Are you wondering whether you should tackle the investment on your own or turn to a bank or asset manager? We show you the advantages and disadvantages of each of the two options and how traditional asset management differs from modern, digital asset management.
Read now: Invest your money yourself or have it invested for you? >
Opening a custody account: in the parents' or the child's name?
1. Children's custody account (junior account)
The custody account is opened in the child's name. Legally and for tax purposes, the assets therefore belong to your child. Until they come of age, you manage the money as their legal representative. On their 18th birthday, control automatically passes to your child.
Advantages:
- Use of the child's tax allowances (saver's lump-sum allowance + basic tax-free allowance)
- Legally clear-cut: the money belongs entirely to the child
- Easy way to pay in cash gifts from family or relatives
Disadvantages:
- Opening it is somewhat more involved, as additional documents such as the child's birth certificate and tax ID are required
- The assets may be taken into account when applying for BAföG (student financial aid) later on
2. Parents' custody account
The money is invested in the parents' custody account (ideally kept separately in a sub-account), so it remains legally and for tax purposes the property of the parents.
Advantages:
- Simpler account opening
- Parents retain full control over the money (even after the child comes of age)
- No impact on BAföG or other forms of support
Disadvantages:
- The child's tax allowances are not used
- Legally, the child has no claim to the assets (not even after coming of age)
Conclusion: Anyone who wants to make use of tax benefits and ensure that the money really does belong to the child and that they gain unrestricted control over it when they come of age usually opts for a junior account.
Tax benefits when saving in ETFs for children
A not insignificant aspect of a children's custody account is the tax allowances:
- Saver's lump-sum allowance: 1,000 euros per year
- Basic tax-free allowance: 12,096 euros per year
(As of 2025)
All in all, this means children can receive somewhat more than 13,000 euros in capital gains tax-free each year – provided that an exemption order or a non-assessment certificate (NV certificate) is in place and as long as the child has no other income (e.g. from part-time or holiday jobs).
On top of this, there may also be the gift tax allowances:
- Parents can transfer up to 400,000 euros to their children tax-free every 10 years (per parent).
- Grandparents may gift their grandchildren up to 200,000 euros tax-free every 10 years.
This makes an equity-based ETF savings plan not only a high-return option, but also a tax-efficient way to build up wealth for the next generation. Although tax aspects should certainly be taken into account, they should not be the central criterion for which form of investment you ultimately decide on. Rather, criteria such as expected return and individual risk appetite should primarily feed into the investment decision. In addition: when it comes to individual tax aspects and structuring options, a tax adviser should always be consulted.
How much should be saved with the ETF savings plan for the child?
How much you should save for your child depends on the financial goals that you want to achieve with the ETF savings plan. Even small monthly amounts can add up to considerable sums over the years:
The calculation is based on the assumption of a 100% equity investment, with which the return opportunities of the capital market can best be exploited, provided that the associated – at times considerably stronger – price fluctuations can be tolerated. The return of 7.96% p.a. assumed for equity saving is based on the actual average return of the MSCI All Country World Index (MSCI ACWI for short, calculated in euros, incl. dividends) over the past 20 years (as of 30/06/2024). It predominantly contains standard stocks from developed and emerging markets. For the purposes of the estimate, a constant performance over the entire term is assumed as a simplification. In reality, however, an equity investment always develops with – sometimes strong – fluctuations, which can also involve temporary losses. Such estimates are not a reliable indicator of future performance. The assumed ongoing costs are the quirion asset management fee in the purely digital variant (0.48% p.a.) plus 0.20% p.a. ETF costs (known as the Total Expense Ratio, TER).
ETF portfolio savings plan for children at quirion: simple, low-cost, broadly diversified, scientifically grounded
At quirion, you benefit from a scientifically grounded investment concept. Our portfolios are globally diversified, low-cost and geared towards long-term wealth accumulation. You can flexibly choose between a one-off investment or a savings plan – or combine both.
Whether for supplementary retirement provision for children or their first car: with quirion, it becomes especially easy for parents to secure their children's financial future or achieve specific investment goals. All without complicated product selection or high fees.
Opening an account with quirion is this easy:
Registrieren
Open an account
Deposit money
Claim your welcome bonus
Auf Rendite freuen!
