Investment for children – when wealth grows with them

Securities savings plans are ideal for providing for the offspring. We have tested the most important providers and explain what parents should be aware of when investing for children. By S. Hildebrandt-Woeckel

On the wall, on the cupboard or in the door frame: they can be found in almost every household with children – small lines showing how fast the offspring has grown. Sometimes more sometimes less. But overall, things moved quickly, as you can see at the end. Suddenly the son or daughter has grown up.

It is good if they are then equipped with a financial cushion that has grown with them – and now offers support for a few study semesters abroad, the first apartment furnishing or even forms a solid basis for your own pension scheme.

That is why investing for children is so important

For decades, parents, grandparents or godparents have paid into a savings account or a construction loan contract. However, various studies show that, even in times of good interest rates, it gives significantly lower returns than the stock market in the long term. If you want to do something good for your children, consumer advocates also agree that you are making a good choice with securities savings plans.

Even strong fluctuations on the stock exchanges, which can be observed at the moment, says the Hamburg-based financial and investment advisor Kris Hauf, it does not change anything. “The investment horizon is crucialsorry.” And it is a particularly long time when it comes to saving for children, which can take up to 18 years. So the earlier you start, the better.

However: Securities savings schemes do not work quite as easily as the good old savings books, which differ only slightly in interest. There are not only different providers, but also different investment strategies. It is therefore important to do some research before you graduate.

What should parents be aware of in a securities savings plan for children?

In order to provide well-founded assistance here, the editors of Börse Online have tasked the Social Science Institute (SWI) with carrying out a test again this year. In total, twenty providers offering so-called custodians for minors were evaluated.

First of all, the overall performance is considered, which includes the cost, the scope of services and the service of the provider. In addition, cost rankings are created. The display is then divided into online, branch and fund banks or robo-advisors. Because when choosing a provider, the investor must make the first decision.

What matters to him? With online, branch and fund banks, customers decide more or less independently where they want to invest. The only differences are that fund banks specialize in mutual funds and ETFs. And the customers in the branch banks usually receive intensive advice. With robo-advisors, on the other hand, the selection takes place automatically. Investors do not choose specific stocks, but an investment strategy. To do this, the client’s risk attitude and objectives are analyzed at the beginning. With this in mind, the optimal return should be generated. Robo-Advisors are therefore suitable for all those who want to use as little effort as possible.

Consors again test winner

Overall, as in the previous year, the most points went to the direct banks with the best value for money. Behind Consorsbank, which takes first place with 93.6 out of 100 possible points, are ING and Flatex. The strength of the first two is the wide range of funds and ETFs in which investments can be made from a low minimum savings rate. At Consors it is 10 euros, at ING one euro.

A plus point of Flatex is that the purchase as part of fund and ETF savings schemes from 25 euros is even offered without an order fee, which means that the platform even overtakes Consors and ING in the pure cost ranking with the best rating of 100 points. Investors should also be aware that custody administration fees of 0.10 percent of the market value per year are incurred if other securities are held in addition to funds and ETFs.

Similar to the direct banks, the cheapest provider for investing money for children, Hypovereinsbank, is not also the leader in the overall ranking of the branch banks. Commerzbank secures this place. The only winners in both evaluations are the fund banks, where FFB — FIL Fondsbank, belonging to Fidelity Investment, is at the top of the podium, and the robos.

There, Quirion wins the race again. Special advantages of the Berliners: RoboAdvisors usually charge an administration fee for their business model. At Quirion, the deposit is free for up to 10,000 euros in the first year, after which moderate fees of 0.48 percent per year apply. Consulting services can also be ordered.

Most banks waive the deposit management fee, but this is often subject to conditions. Deposits with foundations and branch banks are often subject to a fee from the age of majority – which brings us to another decision to be made when protecting children: should you pay into a special children’s deposit or save in your own deposit? “Both parts have advantages and disadvantages,” says financial expert Hauf.

Are you with the right custody provider? Find out here with us.

Investment for children: Use supplements

The advantage of the custody account is access beyond the age of majority. The parents can still have an influence on what is financed with the money. However, this also has the disadvantage that they also use their own supplements. If the deposit is in the child’s name, there are separate savings contributions and basic allowances. “It reduces the tax burden on the parents and increases the amount saved,” emphasizes SWI project manager Johannes Higle. Another advantage of having your own deposit account: grandparents or godparents can get permission and participate directly in the growth of the savings plan.

This article first appeared in BÖRSE ONLINE 40/2022. You will also find the test with all results and the entire methodology in the booklet. Here you get an insight.

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