Child investment account or ETF savings plan? Understanding taxes, control and long-term flexibility for families in Germany. Read more.
Written by Erol Eren, Founder and Managing Director, B.Sc. Economics ·
Many parents living in Germany eventually ask the same question:
What is the best way to invest money for my child?
When families begin planning for their child’s future, two common options appear:
a child investment account
a long-term ETF-based savings structure
Both options aim to achieve the same goal:
building long-term financial security for the child.
However, the two approaches differ in several important aspects:
who controls the money
when taxes apply
how flexible the investment structure remains
Understanding these differences is especially important for expat families living in Germany, where financial systems may work differently from their home countries.
When parents start thinking about investing for their children in Germany, they often focus on the investment product itself.
Common options include:
ETFs
mutual funds
savings plans
However, when building long-term child investments in Germany, the structure of the investment can be just as important as the investment itself.
The structure determines important factors such as:
who legally owns the assets
how taxes apply to investment gains
how flexible the investment remains over time
how the assets may affect student financial aid
For long-term savings plans that often run for 15 to 20 years, these structural decisions can have a significant impact on the final outcome.
This is why many families compare not only investment products, but also how the investment is structured legally and financially.
For families living in Germany, especially expat families - choosing the right structure can be particularly important.
Different investment options may lead to different
outcomes when it comes to:
taxation of investment gains
control over the investment
flexibility if the family moves countries
long-term financial planning
Because of this, many parents compare several ways of saving for children in Germany, including:
child investment accounts (Kinderdepot)
structured long-term investment solutions
education-focused savings strategies
Understanding these options helps families choose a solution that fits both their financial goals and their long-term plans in Germany.
Both routes build wealth for your child with ETFs — the difference is the structure. In a child investment account the money legally belongs to the child: full access at 18, possible impact on student aid (BAföG), tax on every sale. In an ETF policy the parents stay in control: they decide payout timing and handover, and switching funds stays tax-free.
A child investment account (often called a “Kinderdepot”) is an investment account opened in the child’s name.
Parents can use it to invest in assets such as:
ETFs
stocks
mutual funds
The goal is to build long-term savings for the child.
While parents manage the account until the child turns 18, the money legally belongs to the child.
Many banks and online brokers in Germany now offer ETF savings plans within child investment accounts.
At first glance, this solution appears simple and logical.
However, there are several aspects parents should carefully understand.
An alternative approach is a long-term investment structure using ETFs within a financial planning framework.
In this structure, a parent typically remains the policy holder or account owner.
This means the parents maintain control over:
the investment timeline
the structure of the savings plan
when the funds are eventually transferred to the child
The underlying investments can still consist of broadly diversified ETFs, similar to those used in traditional investment accounts.
The key difference lies in tax structure, control and flexibility.
Once the child turns 18 years old, the account legally belongs to them.
This means the child gains full access to the money.
Parents can no longer decide:
when the money is used
how it should be spent
or for which purpose it should serve
For some families this is perfectly acceptable.
Others prefer to maintain more control over how and when the funds are used, for example for:
university education
housing
long-term financial stability
Another important factor is taxation.
Investment accounts in Germany generally follow the standard capital gains tax system.
This means that profits from selling investments can trigger taxes.
Whenever ETFs or funds are sold, capital gains tax may apply.
Over long investment periods this can significantly affect the final outcome.
You can learn more about this topic here:
Children Savings Account Taxes in Germany: What Parents Should Know
Another aspect often overlooked is the relationship between investments and student financial aid (BAföG).
Because the investment account legally belongs to the child, the assets may be considered when applying for student support.
In some cases this can reduce the amount of government assistance available.
For families planning long-term education funding, this can be an important factor.
assets legally belong to the child
full access at age 18
taxes may apply when investments are sold
assets may influence student financial aid
investment changes may trigger taxable events
parents remain in control of the investment structure
flexibility regarding timing of the payout
tax advantages in certain long-term structures
potential protection from student aid asset rules
portfolio adjustments without immediate tax impact
ETF insurances tend to perform better long term.
Here's why!Olena and Andriy moved to Germany three years ago with their young son Denys.
Like many international families, they wanted to build financial security for their child’s future.
Their bank recommended opening a child investment account with an ETF savings plan.
At first, the solution seemed straightforward.
Later they discovered two important aspects:
Denys would receive full access to the investment at age 18
the assets might influence student financial aid eligibility
The family then started looking for alternative solutions that would allow them to maintain more control over the investment structure.
Today they use a long-term ETF-based structure that offers more flexibility while still investing in diversified ETFs.
Consider a simple example.
If parents invest - 100€ per month for 18 years
with an average annual return of 7%, the long-term result could look like this:
Child investment account
≈ 39,600€
ETF-based long-term solution
≈ 42,800€
The difference often results from tax treatment and structural flexibility.
| Paid in | 21.600 € |
|---|---|
| Child account | 39.600 € |
| ETF policy | 42.800 € |
Example from the article: €100 a month over 18 years at 7% p.a. — simplified model calculation; the difference comes from the tax structure. No guarantee of future results.
Many parents focus first on choosing the right investment product.
However, successful child investment planning in Germany usually depends on the overall financial structure of the household.
Important factors include:
available monthly budget
tax situation of the family
how long the family plans to stay in Germany
long-term goals for the child
For expat families especially, understanding how child investments fit into their overall financial planning in Germany can be extremely valuable.
Looking at the entire household structure often leads to better long-term decisions.
Click below if you want to read more about household structure.
When it comes to building wealth for children, one factor matters most:
Time.
The earlier parents begin investing, the more powerful the compound interest effect becomes.
Many families start saving:
shortly after a child is born
once child benefit payments begin
when a regular monthly savings amount becomes possible
Even small contributions can grow significantly over time.
The most important step is choosing a strategy that fits the family’s long-term situation.
Two routes, one timeline: when does control over the money pass to your child?
Can you say today whether your child will be ready at 18 to decide alone about a five-figure sum?
A junior account, a savings book or a deposit registered to the child
Turning 18 is fixed in law. Nothing here can be moved.
The date is set by law — not by you.
The contract is in your name — the money is meant for your child
From 18 you can hand over — but you do not have to. The moment stays your decision.
You can change the date later at any time. You keep the decision — for as long as you want.
This is not distrust towards your own child. It is the recognition that maturity is not a date.
Four questions about structure — answer them honestly for your situation.
Your answers stay in your browser — nothing is stored or transmitted.
Both child investment accounts and ETF-based investment structures can help build long-term wealth for children.
However, the key differences often lie in:
Control over the assets
Tax treatment
Flexibility for parents
Instead of focusing only on a single investment product, families benefit from considering the overall financial structure of their household.
With the right strategy, parents can create long-term opportunities for their child’s future.
Many parents and expat families ask similar questions:
How much should we save for our child?
What structure makes the most sense in Germany?
Which option fits our long-term plans?
In a short Clarity Call, we can look at your situation and explain the different possibilities.
Book your free Clarity Call here
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