Which is a better investment for your newborn

Investing for children: five ways for children to save

Lana Iliev, 11/11/2020

Children are expensive: According to the Federal Statistical Office, a child up to the age of 18 costs an average of € 130,000. This is followed by studies or training and require financial support until the youngsters can stand on their own two feet. All the better if parents, grandparents or godparents have saved up something with which the children's goals can be realized.

But in times of low interest rates, finding a meaningful investment for children is more difficult than ever. The classic savings account in particular just doesn't make sense at the moment. Read here which alternatives are available and which investments are worthwhile for children.

Saving for children: important criteria

Before you get started and start saving for the next generation, there are three fundamental questions that need to be answered:

1 | How high can the risk be?

Of course, an investment for children should be as safe as possible. But in times of low interest rates, savings accounts that are covered by the statutory deposit guarantee cannot actually generate returns that compensate for inflation. Therefore, the money saved loses its real value.

Therefore, consider a little risk, but protect the investment with adequate risk diversification. The best way is to use a thoughtful combination of high-return and low-risk investments.

Open credits

Before you start investing for children, pay off any outstanding loans first. The interest you get on the investment will hardly make up for the high interest on loans. Plus, you certainly don't want to leave your children in debt.

2 | Is it a single premium or regular installments?

Would you like to set aside an already existing, larger amount for the child, keep small gifts of money that arise over time safely or start saving in a targeted manner?

For the latter, consider savings plans. You regularly pay a self-selected amount into a savings plan and can thus save a considerable amount over the years.

If, on the other hand, it is a question of sums that are already available, a fixed investment is worthwhile. In this way you tie up the money over a longer period of time, but also achieve a better return. However, you should never invest all of your money in a single investment product.

3 | Save in the child's name or in your own name?

Some investments, such as savings accounts, offer the option of being officially attributed to the child. This has advantages and disadvantages:

Savings bookOvernight moneyFixed depositETF


Equity crowdfunding

Return *lowlowlowmedium to highmedium to high
Risk profilesafety-orientedsafety-orientedsafety-orientedreturn-orientedreturn-oriented
Investment horizonshort termshort termmedium to long termmedium to long termmedium term
One-time payment
Savings plan

Investment in

Child's name

Investment in

own name


Five ways of investing money for children

1 | The classic: the savings account

In general, savings accounts are not a good idea at the moment. Interest rates are so low that they are below the rate of inflation. In this way, the real value of the money disappears and in the end less of the savings amount remains than what was deposited. However, there are individual savings account and savings account offers especially for children, which entice with interest surcharges or bonus payments.

The interest on such offers is often capped. For example, you get 3% interest on the first € 500, while everything above this amount earns interest underground. In certain cases, however, such a savings account can still make sense, for example to keep small monetary gifts safe.

Attention: Banks can change the interest on the savings account. Should interest rates be lowered, you will find an alternative as quickly as possible so that you do not know that your savings will yield even worse interest rates.

2 | Daily allowance for children

Call money accounts offer a very high degree of flexibility. There should be money here that is needed promptly. So as the child's 18th birthday approaches, you should shift the capital from long-term investments to a call money account so that it is available soon.

Even small gifts of money can initially be parked in a call money account. As soon as a large amount of money has accumulated, it should definitely be invested elsewhere.

3 | Fixed deposit for children

On the other hand, a larger amount can be deposited on a fixed-term deposit account. The interest rates are higher here than with overnight money. On the other hand, fixed-term deposits (as the name suggests) are also less flexible.

However, fixed-term deposit rates are currently also affected by the generally low level of interest rates. Fixed-term deposits with a term of more than five years are currently not recommended, as you would not benefit from an interest rate hike.

4 | ETF savings plan for children in the Junior Depot

Stocks are an investment option for children, even if many people do not dare to go public due to the volatility of securities. However, especially with a long-term investment horizon, fluctuations in value can be balanced out and ultimately generate a higher return than with low-risk investments.

Junior Depots

A junior custody account is a bank account that contains securities such as stocks or fund shares. Since it is specifically for children and is run in their name, high-risk, speculative securities may not be included.

In the past, the lowest-risk way to invest in stocks was via ETFs (Exchange Traded Funds). This means passively managed funds that replicate an index such as the DAX (German stock index). Invest in an ETF, automatically invest in several stocks and thus increase the risk diversification. In addition, the fees for ETFs are significantly lower than for traditional equity funds.

By using a savings plan, fluctuations in the stock market can also be compensated, because this is where the so-called cost-average effect comes into play. With the regular savings plan deposits, more shares are automatically bought when the stock market is low, as they are cheaper. During a stock market high, however, there are automatically fewer, because the individual shares are more expensive. Over time, you will therefore buy at the average price.

However, an ETF investment only pays off with a long-term investment horizon. Because under no circumstances may the shares be sold in times of bad stock market prices. So if you are saving for your child in the short term, ETFs are not a good option. In addition, there is still the risk that your child will reach the age of majority during a stock market crash and have to sell or sell the ETF shares at a loss.

5 | Digital real estate investments via BERGFÜRST

Real estate crowdinvesting via BERGFÜRST offers a medium-term but nevertheless high-yield alternative. The brokered investment opportunities are characterized by fixed terms of one to five years and investors receive them 5.0% to 7.0% interest per year. Equity crowdfunding and ETF shares are not covered by the statutory deposit guarantee.

In real estate crowdinvesting, a large group of private investors jointly invest in real estate projects via an internet platform, thus making mezzanine capital available. This means that private investors can now invest in an asset class that for a long time was only available to large investors.

Crowdfunding and crowd investing are not to be confused. While the former is used to collect donations via online platforms, the latter is a way of investing money with a prospect of returns.

BERGFÜRST is also a good complement to an investment in ETF. Because of the low minimum investment volume of just € 10, the portfolio can easily be expanded to include the real estate asset class. Alternatively, the Savings plan on BERGFÜRST can be used to save monthly for the future of the child.

It is not possible to open a BERGFÜRST depot on behalf of your child. However, you can keep an account that will be transferred to your child at the age of 18.

An overview of investments for children:

Savings bookOvernight moneyFixed depositETF


Equity crowdfunding

Return *lowlowlowmedium to highmedium to high
Risk profilesafety-orientedsafety-orientedsafety-orientedreturn-orientedreturn-oriented
Investment horizonshort termshort termmedium to long termmedium to long termmedium term
One-time payment
Savings plan

Investment in

Child's name

Investment in

own name


* The indication of the return is based on developments in the past and may turn out differently in the future

** Only pays off if special children's offers are used at special conditions

Which investments you should avoid for children

The Stiftung Warentest advises against training insurance as a financial investment for children. These are insurance policies with high costs and little flexibility. The same applies to letters of protection. In general, consumer advocates advise you to save and insure separately, as combination products usually have poorer conditions.

A home loan and savings contract is also poorly suited as an investment for children. A home loan and savings contract usually only pays off if you really want to build your own home in the future, and who can know whether a child will want to do that at some point? In addition, interest rates are also currently low here.

Even with classic bank savings plans, only a very low interest rate can currently be earned due to the low interest rate phase.

Five final investment tips for kids

1 | Pay attention to security and real interest

The safety of the investment for the child is of the utmost importance, but also calculate whether the investment will still generate a return after you subtract inflation.

2 | Start early

The earlier you start, the more you benefit from compound interest. In addition, you can invest in the stock market for a long time and balance fluctuations in value.

3 | Does it really make sense to invest on behalf of the child?

You may save taxes, but think carefully about the disadvantages that could arise for the child in terms of health insurance and BAföG. The amount of the deposits and the investment period are decisive here.

4 | Consistently save

Constantly build up the savings for the child and save regularly by using savings plans or setting up a standing order.

5 | Reallocate investments as the child gets older

As the child's 18th birthday approaches, start shifting your investment to safe savings accounts at an early stage so that the money is available.

Image Copyright: Gelpi / Shutterstock.com

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