What options exist for saving for children in Germany? A structured comparison. Read more.
"What is the best way to save for my child?" – almost every parent asks this eventually. And the answers online are rarely helpful, because they usually come from someone with exactly one product to sell.
So here is an honest overview of the realistic options: what they deliver, what they cost, and who they suit. Including the ones we do not offer ourselves.
One thing upfront: there is no single best solution. There is only the one that fits your family.
The classic, and still the most common starting point. Money in a savings account, a Tagesgeld account, or the proverbial piggy bank.
The advantage is real: the money is available at any time and does not fluctuate in value.
The disadvantage is just as real: over long periods, inflation erodes its purchasing power. With a time horizon of 15 or 18 years, that is not a theoretical problem – it is a guaranteed real loss.
Who it still suits: your emergency buffer, and money you will need within the next two to three years. For your child's long-term wealth building, it is the most expensive form of safety there is.
Here you invest regularly into broadly diversified ETFs, usually through a depot held in your child's name.
The strengths: low costs, high flexibility, adjustable or pausable at any time. And over long periods, the chance of real growth. If the depot is in your child's name, you can also use their tax allowances – together up to roughly 13,384 euros of investment income per year tax-free (2026 figures).
The weaknesses nobody mentions: at 18, the money belongs to your child. Completely and irreversibly. You will have no legal say in what it is used for. And because it counts as your child's assets, it can reduce their BAföG entitlement later.
Who it suits: parents who want maximum flexibility and low costs, are confident the money should stay with the child, and are comfortable losing control at 18.
Here your money flows into the same broadly diversified ETFs, but inside an insurance wrapper. Typically you as parents are the policyholder at first.
The strengths: you keep control, for as long as you want. Nothing happens automatically on the 18th birthday. You decide when your child takes over. And as long as the capital legally belongs to you, it is generally not counted as your child's assets for BAföG.
The tax advantage is not lost either: as soon as you make your child the policyholder, the contract legally belongs to them – and their allowances become available just as they would in a depot. You simply do not have to do that at exactly 18.
Then there is the long-term perspective: once your child takes over the contract, they can continue it as a lifelong savings plan – for their first home, a wedding, or even as retirement provision with the tax benefit from age 62 (the 12/62 rule, Halbeinkünfteverfahren).
The weaknesses, honestly stated: a policy generally carries higher ongoing costs than a bare depot. And it is built for long time horizons – exiting early can be unfavourable.
Who it suits: parents who want to decide the handover moment themselves, need BAföG protection, and are genuinely planning long term.
These products are often pitched to parents right after birth. The idea sounds appealing: save and insure at the same time.
The problem is the construction. Many classic policies combine a savings component with an insurance component and guaranteed interest. The result: high costs, limited return potential, and little transparency about where your money actually goes.
We say this clearly, even though we work with policies ourselves: a classic education insurance policy with a guaranteed rate is a fundamentally different thing from an ETF policy. With one, you pay for guarantees that eat your returns. With the other, you invest in the market.
Who it suits: honestly, rarely anyone. If someone tries to sell you one, ask for the full cost breakdown across the entire term. The answer is usually revealing.
Put the options side by side and one thing becomes clear: the question is not "which product has the highest return?"
The real questions are:
Who should have access to the money, and when? That decides between a depot in your child's name and a policy.
How long are you really planning for? That decides between Tagesgeld and the capital markets.
How much do tax allowances, BAföG protection and flexibility matter to you – and in what order?
Savings accounts and Tagesgeld are the worst choice for long horizons, even though they feel safest. Classic education insurance is mostly outdated. That leaves the depot and the ETF policy – and they differ not in the investment, but in the structure.
Which option has the highest return?
Over long periods, typically broadly diversified ETFs – whether in a depot or in a policy. The return differences between those two come mainly from costs and taxes, not from the investment itself.
When is the right time to start a child savings plan?
The earlier the better. Compound growth needs time, and that is the one factor you cannot make up for later.
Which is better: a depot or an ETF policy?
It depends on whether you want to keep control beyond the 18th birthday and whether BAföG is a concern. The depot is cheaper and more flexible. The policy gives you control over the handover moment and BAföG protection.
How much should I save each month?
There is no correct amount. What matters more than the size is that you start at all and keep going consistently.
An honest comparison does not end with a winner. It ends with a better question.
Most guides pretend there is one optimal product. There is not. There are families for whom a cheap depot is exactly right. And there are families for whom control over the handover moment is worth more than a few tenths of a percent in costs.
We work mainly with the ETF policy, because for many of the families we support it is the more suitable structure. But we will also tell you when a depot would be the better choice in your case. Anything else would not be advice. It would be sales.
This article is general information and does not replace individual tax or legal advice.
Sources: German Federal Ministry of Finance (basic allowance, saver's allowance), German Income Tax Act (EStG). Figures as of 2026 – tax allowances are adjusted annually.
About the author
Erol Eren holds a Bachelor in Economics and is a founder of ETF4Kids, advising families and expats in Germany on child savings plans and family finances. ETF4Kids GmbH is licensed as a financial investment broker (§34f GewO), insurance broker (§34d GewO) and real estate loan broker (§34i GewO) by the IHK Region Stuttgart.
which savings option really fits your family,
not just which one is being advertised loudest,
it is worth gaining clarity first.
Because good decisions
do not come from rushing.
They come from understanding.
Find out more!
