Those who plan for their children’s future usually have a clear goal: to relieve their offspring’s financial burden as they start their adult lives. But while the monthly savings payments flow diligently, the biggest return lever often remains unused.
Many parents save in their own name and give away cash to the tax office year after year. The solution lies in shifting the assets to the child. This is simple in theory, but often fails due to practical implementation and bureaucratic hurdles.
Junior depot & taxes: This is how parents use all allowances
In Germany, capital gains (interest, dividends, capital gains) are subject to withholding tax of 25% plus solidarity surcharge and, if applicable, church tax. Every saver is entitled to a flat-rate savings amount of €1,000 per year.
The problem in practice: For many parents, this allowance has already been completely exhausted through their own stock portfolio or daily money account. Savings installments that are included in the parents’ portfolio for the children are effectively taxed from the first euro. Over a period of 18 years, this massively reduces the compound interest effect.
A child, on the other hand, is considered an independent person for tax purposes. Not only is he entitled to his own €1,000 flat-rate savings allowance, but, if he has no significant income of his own, he is also entitled to the basic allowance of currently over €12,348 (As of 2026). Anyone who legally transfers the assets to the child can receive significant capital gains completely tax-free.
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Calculation example: How big is the effect really?
Anyone who invests 100 euros a month over 18 years and achieves an average return of 6% per year will have a final net worth of around 38,800 euros. Of this, around 17,200 euros are attributable to investment income.
If these returns are earned in the parents’ portfolio and your own savings allowance has already been exhausted, withholding tax will be due on a large portion of the profits. At 25% plus the solidarity surcharge, the yield is noticeably reduced, by several thousand euros depending on the individual situation.
However, if the custody account is legally owned by the child and the capital gains remain within the saver’s flat rate and, if there is a non-assessment certificate, within the basic allowance, these income can be collected tax-free. The difference can quickly amount to 2,000 to 4,000 euros over 18 years without parents paying in an extra euro. The tax advantage acts as an additional return component here.
| 💡Important information about BAföG As attractive as building up assets in the child’s name is for tax purposes, parents should keep one limit in mind: the credit towards BAföG. If the child later studies and applies for state support, their own assets may not exceed certain allowances. This allowance for trainees under 30 is currently 15,000 euros. If the deposit balance is above this, the child must first use the excess part for education. |
The right investment strategy: Diversification beats savings accounts
In order to maintain and increase assets over 10 to 18 years, adjusted for purchasing power, there is no way around a broad asset allocation. The foundation is usually formed by low-cost ETFs that reflect global stock markets.
Two factors play a central role here:
- Accumulation: Many ETFs automatically reinvest dividends. This promotes the compound interest effect, but since the investment tax reform has led to an annual advance flat rate that is relevant for tax purposes. Another reason to use the child’s allowances.
- Inflation protection: Only tangible assets (stocks, gold) offer long-term protection against currency devaluation. A pure savings account is a guaranteed loss with moderate inflation.
So the theory makes sense: open a portfolio for the child, buy globally diversified ETFs, set up an exemption order and reinvest the tax savings. But this is exactly where the “paper war” begins for many parents.
Open a children’s depot: These bureaucratic hurdles are lurking
Despite the clear advantages, many parents shy away from the effort. Manually setting up and maintaining a child custody account at a classic direct bank (“do-it-yourself” approach) is often laborious.
- Legitimation: Since minors are particularly protected, both legal guardians usually have to legitimize the process (PostIdent/VideoIdent) and submit birth certificates
- Rebalancing: In order to keep the risk profile stable, the proportions of stocks and bonds must be adjusted regularly. If you do this manually, you have to monitor prices and pay transaction costs
- Documentation requirements: For full tax exemption (income exceeding €1,000), a non-assessment certificate (NV certificate) must be regularly applied for at the tax office and submitted to the bank
- Complexity of selection: Which ETFs are physically replicating, which use ESG criteria (sustainable investments) and which offer the best cost ratio? The choice overwhelms many parents
Automated solutions: Robo-advisor for children
This is where modern robo-advisors like… OSCAR2 the bridge between maximum tax optimization and minimum time expenditure. Instead of piles of paper, there is an app that legally keeps the custody account in the name of the child (important for taxes!), but gives the parents full administrative control.
Why the automated approach is often superior:
- Integrated IBAN logic: The children’s depot gets its own IBAN. This means that grandparents or godparents can also transfer money directly to the deposit without having to go through the parents’ account. The money is invested immediately according to the chosen strategy
- Inflation protection included: Instead of just relying on standard ETFs, modern algorithms also add components such as inflation-protected bonds or gold to reduce volatility and secure the purchasing power of capital for decades
- Automatic rebalancing: The software continuously checks whether the percentage distribution of the systems still corresponds to the target profile. Deviations are automatically corrected without parents having to manually intervene or observe courses
- Tax transparency: Due to the clean legal separation (deposit in the child’s name), the annual tax certificates are correctly issued to the minor. The process of offsetting losses and taking partial exemption into account for equity funds takes place in the background
Cost comparison: DIY savings plan or robo-advisor?
A common argument against automated asset management is the cost. A self-managed ETF savings plan often only costs the ETF fees (approx. 0.2% pa), while robo-advisors also charge a service fee (usually 0.5 – 1.0%).
Mathematically, the DIY approach is cheaper, but only if you stick to it perfectly.
For disciplined parents with financial knowledge, this is doable. However, if you value saving time or are unsure about choosing a fund, you have to weigh the fee against the benefits. Especially with a term of 18 years, emotional bad decisions (selling in a crash, forgetting to rebalance) are much more expensive than the service fee. The robo-advisor acts emotionlessly and strategically.
Checklist for opening a portfolio
To create a legally correct account in your child’s name, have the following ready:
- Birth certificate: Digital scan or copy
- Child’s tax ID: This usually comes by post from the Federal Central Tax Office shortly after birth
- ID cards: From both legal guardians
- Proof of custody: In the case of joint custody, both parents usually have to agree
Conclusion: Time savings as a return factor
Building wealth for children is an 18-year marathon, not a sprint. Many parents start out highly motivated as “self-made fund managers”, but fail after the tenth Excel spreadsheet due to the reality of life. A robo-advisor is a rational decision for quality and stamina, while modern systems like OSKAR make the tax privileges of a junior portfolio usable on a mass scale. Because in the end, what counts is the net return after taxes and inflation, and the freedom that the child receives on their 18th birthday.
If you want to check whether an automated junior portfolio suits your own situation, you should compare providers and pay particular attention to the cost structure, risk profile and tax implementation.
Frequently asked questions about the junior portfolio (FAQ)
Who is allowed to dispose of the money in the child custody account?
Legally, the assets belong to the child from the first euro. Parents only manage it in trust. Withdrawals are only permitted if the money is used in the interests of the child (e.g. driving license, education). Misappropriation for parents’ private consumption is legally prohibited.
What happens to the deposit when the child turns 18?
When the child comes of age, sole control automatically passes to the child. It can decide: let it continue, shift it or pay it out. With providers like OSCAR2 The depot is usually easily converted into an adult depot.
What is a non-assessment certificate (NV certificate)?
If the child’s income exceeds the savings allowance (€1,000) but remains below the basic allowance, parents can apply to the tax office for a NV certificate (usually valid for 3 years). It means that the bank pays no taxes at all.
Can grandparents or godparents also pay directly into the deposit?
Yes. Thanks to their own depository IBAN with modern providers, relatives can directly contribute to wealth creation via standing orders without the money first having to go through the parents’ accounts.
2Note: Oskar is a brand of Oskar.de GmbH, a spin-off of finanzen.net GmbH. Scalable Capital Vermögensverwaltung GmbH manages the assets, Baader Bank AG manages the securities accounts with clearing accounts. Further information can be found here.