Securities investments: High-yield investments for children
In times of record-low interest rates, savers – and therefore also parents and grandparents – cannot avoid the stock market. Comdirect is tempting with a free “Junior Depot”, ING-Diba promises good return opportunities with the “Direkt-Depot Junior” and Maxblue, Deutsche Bank’s direct broker, is advertising a children’s depot. All custody accounts for minors are free of charge with direct banks, so there are no account management fees. There are only a few providers who require an active savings plan from the investor so that account management remains free, for example Comdirect and S Broker, the broker of the savings banks.
Exchange-traded funds (ETFs) are ideal for all parents or grandparents who want to build up a small fortune for the smallest family members over many years and are not afraid to take some risks. In the best case, ETFs replicate a stock index 1:1: If the leading German index DAX increases by one percent, the DAX ETF also increases by one percent. The robo advisor ginmon offers parents the opportunity to set up an ETF savings plan for their offspring, which is managed in the child’s name from the start. Upon reaching the age of majority, the rights of disposal are automatically transferred to the child and they can freely dispose of the account.
In the past, ETF savings plans that track global stock indices such as the MSCI World or the MSCI All Country World have yielded annual returns of between six and eight percent. There is no guarantee that this development will continue, but with a long investment period of ten years or more, a comparable return is very likely – an ETF savings plan on the MSCI World forms a good basis for a “Junior Depot”. We will tell you more about this in the guides MSCI World-ETF and DAX-ETF.
Tip: Some direct banks offer a selection of ETF savings plans on very good terms. There you usually not only get a securities account for free, you also get mostly ETF savings plans free of charge.
By the way: Stiftung Warentest recommends ETF savings plans for investing money for children – and provides a sample calculation in “Finanztest” (12/2017). There it says: “If you start an ETF savings plan at birth, after 18 years you will have a savings rate of 50 euros per month and an assumed return of seven percent per year, a stately 21,165 euros.” Do you want more about ETF savings plans Experienced? Then we recommend our ETF savings plan guide.
Important: Money that must be available in less than five to ten years should not be invested in stocks. If parents and grandparents start saving too late, i.e. the time until their offspring will come of age is five years or less, then an investment in stocks could be too risky.