Investing for children

Saving for education, a first home or a pension later in life are different goals. Before choosing a product, clarify when the money should be available, how much you can save and who should own the assets. A Kidspolice and an investment account for a child differ particularly in contractual rights, costs and additional insurance cover.

Start with the occasion and time horizon

A birth, starting school, gifts of money or an inheritance may be the starting point. If the money is needed on a fixed date, access and possible market fluctuations are particularly important. Investing until the child starts work serves a different purpose from planning for retirement. Include your own financial reserves so that contributions remain affordable over time.

Kidspolice: an insurance policy for the child

The ERGO Kidspolice is available in the Dynamik, Balance, Chance and Index versions. They differ in their investment approach and possible guarantees. The policyholder, insured person and beneficiaries have different roles. Withdrawals, changes to contributions and a later transfer to the child depend on the policy. Zukunfts-Kidspolice Chance is a separate product and is not the same version as Kidspolice Chance.

An investment account in the child's name

A Juniordepot is a securities account in the name of a child under 18, for example for funds or ETFs. The child's legal guardians manage it on their behalf until adulthood; the assets belong to the child. Once the child comes of age, they make their own decisions. An account in a parent's name has a different ownership arrangement. This explanation is general guidance and does not promise that Joel can arrange an investment account.

Compare costs and risks on the same basis

For an insurance policy, consider acquisition and distribution costs, administration, investment costs and any additional cover. For an investment account, custody fees, transaction charges and ongoing fund costs may apply, depending on the provider. Compare the same savings amount and time horizon after costs. Funds can lose value in either arrangement. A long term does not guarantee a profit; an insurance policy only provides the guarantees expressly agreed.

Choose access and control deliberately

For a policy, review withdrawals, making the policy paid-up, cancellation and the effects on cover or guarantees. With a child's investment account, the value at the time of sale may be below the amount invested. Before transferring money to the child, understand ownership and later control. Tax questions and possible effects on income- or asset-related benefits require a separate assessment.

What to record before you start

Note the child's age, the investment goal and the earliest date the money will be needed. Decide who should pay in, who should make decisions and whether additional insurance cover is wanted. Product documents and key information documents then help compare specific costs, risks and contractual rights.