Opening a brokerage account for a child can have advantages but also risks. Read more.
If you want to invest for your child long term, you will eventually face a fundamental decision. Not just "which ETF?", but: what structure should the money sit in?
Two paths dominate – a securities account (Depot) in your child's name, and an ETF policy.
Both end up invested in the same markets. The difference is not the investment. It is control, taxes and flexibility. And that is often what decides the long-term outcome.
If the depot is in your child's name, the assets legally belong to your child. You manage them in trust until they come of age.
The big advantage is your child's own tax allowances: the saver's allowance (Sparerpauschbetrag, 1,000 euros per year), the basic tax-free allowance (Grundfreibetrag, 12,348 euros in 2026) and the special expenses allowance (36 euros). Together, investment income of up to roughly 13,384 euros per year can remain tax-free.
That is a strong argument. But it comes at a price many parents only notice late.
At 18, the money is your child's – completely and irreversibly. On their 18th birthday, your child gains full control. Whether the money goes toward education or a car is no longer legally your call. And assets already transferred cannot be taken back – they count as a gift.
BAföG implications: because the money belongs to your child, it counts as their assets. If it exceeds the BAföG asset threshold, their student aid entitlement can be reduced or lost. Parents' assets, by contrast, are not counted this way.
With an ETF policy – the route we mostly work with at ETF4Kids – your money flows into the same broadly diversified ETFs, but inside an insurance wrapper. Typically you as parents are the policyholder at first, with your child as the insured person.
The decisive difference from a depot: you do not have to choose between control and the tax advantage. You can have both, one after the other.
You keep control – for as long as you want. Because you are the policyholder, you decide when your child takes over. Unlike a depot, nothing happens automatically on their 18th birthday. You can hand over control at 18, or deliberately keep it longer if you feel your child is not ready. You steer the timing, not the calendar.
And you can still use the same tax advantage as with a depot. As soon as you make your child the new policyholder, the contract legally belongs to them. From that point their own tax allowances – the basic allowance and the saver's allowance – apply just as they would in a depot in their name.
The key point: you can access this tax advantage once your child is the contract holder. But you do not have to do that at exactly 18. You decide when the right moment is.
That gives you the best of both worlds: the control of a parent-held depot and the allowances of a child-held one – just on your timeline rather than tied rigidly to a birthday.
BAföG protection while you are the policyholder: as long as the capital legally belongs to you, it is generally not counted as your child's assets for BAföG purposes.
A depot in a child's name mentally ends at 18. An ETF policy can be thought of far more broadly: it can continue as a lifelong investment plan for your child.
Once they take over the contract, they can use the capital for the big milestones – their first home, a wedding, the start of their career.
And if your child lets the contract run longer, another advantage comes into play: if the policy is held long enough and paid out from age 62 (with a minimum term of 12 years – the so-called 12/62 rule), only half the gain is taxed at their personal rate (Halbeinkünfteverfahren).
So today's child savings plan can become tomorrow's tax-efficient retirement provision for your child. Important: tax-privileged does not mean tax-free. But it is an advantage a plain depot does not offer in this form.
Honest advice means saying this too: a policy generally carries somewhat higher ongoing costs than a bare depot. And it only plays to its strengths over long time horizons – exiting very early can be unfavourable.
So it is not automatically right for every family. Whether the advantages – timed control, BAföG protection, a lifelong structure with the tax benefit from age 62 – outweigh the costs depends on your horizon and your goals.
We work through exactly that with you transparently. Including when a depot is the better choice in your case.
There is no universal right or wrong here. As a rough guide:
A depot in your child's name fits if you want to use the tax allowances immediately and simply, you are confident the money should be your child's, and you are comfortable losing control at 18.
An ETF policy fits if you want to decide the moment of handover yourself, still use your child's tax allowances, and build a structure that carries well beyond their 18th birthday – potentially all the way to their retirement.
Does the money in a child depot really belong to my child?
Yes. A depot in your child's name is legally your child's asset. At 18 they gain full control, and you cannot take the assets back.
Can I still use my child's tax allowances with an ETF policy?
Yes. As soon as you make your child the policyholder, the contract legally belongs to them. From that point the basic allowance and saver's allowance are available to them.
Do I have to hand over the policy at 18?
No. You decide when the right moment is. You can keep control considerably longer. However, you can only use the tax advantage once your child is the contract holder.
Does the money count against BAföG?
With a depot in your child's name: yes, it counts as their assets. With an ETF policy: generally not, as long as you remain the policyholder.
A depot and an ETF policy invest in the same markets. The difference lies in control, taxes and flexibility.
The depot wins on immediate allowances, but hands over control irreversibly at 18 and can cost BAföG. The ETF policy lets you keep control as long as you want, enables the same allowances once your child becomes the contract holder, and can run on as their lifelong savings plan. In return it asks for a longer commitment and somewhat higher costs.
Which one fits your family is your decision. And we help you work it through honestly.
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 structure really fits your child,
a depot or an ETF policy,
it is worth gaining clarity first.
Because good decisions
do not come from rushing.
They come from understanding.
Find out more!
