Children's savings
Young woman laughing at the wheel of a blue car, her hair blowing in the wind

Savings account, shares or an ETF: what do you actually save in?

The first of the two questions
  • Why individual shares are the wrong pick for a child's savings
  • Why Bitcoin is not an 18-year savings plan
  • Why you cannot sell a window out of a flat
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Saving for a child over 18 years comes with one condition that overrides everything else: it has to work without daily attention, and it must not collapse on the day it is needed. That condition is where most alternatives fail — not because they are bad, but because they were built for a different job.

Let's go through them one by one.

In short

Which type of investment is right for a child?

Saving for a child sets three conditions that override everything else: it has to last 18 years, it must not demand daily attention, and the money has to be there on the day — in part amounts as well.

A broadly diversified ETF on the global equity market is the only common savings vehicle that meets all three. It bundles 1,000 to 1,400 companies from more than 20 developed markets, adjusts itself through fixed index rules, is available every trading day in any part amount, and returned just under 9 percent per year over 20-year periods historically (Deutsches Aktieninstitut, return triangle).

The alternatives each fail on a different condition: a savings account loses real purchasing power whenever interest sits below inflation. Individual shares underperformed short-term treasury bills over their lifetime in 57.4 percent of cases (Bessembinder 2018). Bitcoin swings too hard — 77 to 93 percent drawdowns — for a fixed date. And a property cannot be sold in parts.

Past performance is not a reliable indicator of future results. Investments involve risk.

The basket

What is actually inside an ETF?

Picture a basket. Instead of picking one company, you buy a share of everything in it — at once, with one transfer a month.

An ETF tracking the MSCI World holds roughly 1,400 companies across 23 developed markets. It contains the firms whose products sit in your home — the maker of your phone, the company behind the search engine, the group behind the toothpaste, the bank holding your account. Not as a bet on one of them, but as a share in all of them.

What that means for a child’s portfolio: the basket maintains itself. No single company in it is large enough to determine the outcome. And because the composition follows fixed, publicly visible rules, nobody has to decide who stays in over 18 years.

Composition and number of countries follow the MSCI index rules. The exact number of constituents changes with the index’s regular reviews.

Try it out

What happens when a company goes bust?

That is the worry parents raise most often. Try it: click a company on the left and watch what happens to the basket. Then see what happens on the right, where everything rides on one company.

Your basket: around 1,400 companies

Klick ein Unternehmen an und schau, was passiert.

For comparison: a single stock

What you cannot see here: larger companies carry more weight in the index than smaller ones — losing one of the biggest hurts more than losing one further down. But it stays a part of the basket, never the whole thing. That is the difference from a single stock.

Companies shown as examples from the MSCI World. The composition follows publicly available index rules and changes at the regular reviews.

The classic mistake

Why a single share does not suit an 18-year plan

In 2000 Nokia was the largest mobile phone maker in the world. On 20 June 2000 the share stood at 64.88 € — the highest level in its history. Apple was then seen as a niche maker that had narrowly escaped insolvency a few years earlier.

Anyone wanting the obvious, “safe” choice back then bought Nokia. Today the share trades around 80 per cent below that peak, while Apple is among the most valuable companies in the world.

The point is not that Nokia was a bad company. The point is that in 2000 nobody could reliably say which of the two would win the next 18 years — and that with a child’s savings plan you do not have to make that call at all. An index holds both. If a company loses relevance it drops out under publicly visible rules and the next largest moves up, without anyone having to intervene.

Price data: boerse.de. The all-time high of 20 June 2000 is clearly documented; sources differ on the current price, so only the order of magnitude is given here.

The comparison

Which five ways are there to save for a child?

The yardstick first, the result second. On the left is what a child savings plan has to deliver over 18 years. On the right you pick the option — and see which points it hits.

What a child savings plan has to do

The ticks change with the option you pick on the right.

  1. Beats inflation over the long run Otherwise there is less at the end than went in.
  2. Is reliably available on the day The 18th birthday does not move — and often only part of it is needed. Without extra charges for paying out.
  3. Can be handed over when you choose Not the 18th birthday decides, but you — later too, and in stages if you want.
  4. Can be optimised for tax Switching and adjusting without the tax office taking a cut every time.
Savings account Individual shares Bitcoin Property Broadly diversified ETF

Savings account

The German classic

1 of 4 met

Meets three of the five points — just not the one that matters over 18 years.

  • Beats inflation over the long run: When interest sits below the inflation rate, the balance loses purchasing power every year. The figure stays the same — what it buys does not.
  • Is reliably available on the day: Available at any time, in any part amount.
  • Can be handed over when you choose: If the account is in the child’s name, control passes automatically on their 18th birthday. The date is set by law, not by you.
  • Can be optimised for tax: Interest is investment income. Beyond the annual allowance it is taxable — rarely the main issue at today’s rates.

Deposit guarantee: § 8 Einlagensicherungsgesetz (EinSiG).

Individual shares

Finding the one good company

1 of 4 met

The numbers on this are clearer than most people expect — and they do not argue for trying.

  • Beats inflation over the long run: 57.4 percent of all US shares performed worse over their lifetime than short-term treasury bills. The entire net gain of the market comes down to the best 4.3 percent.
  • Is reliably available on the day: Tradable every trading day, in parts as well.
  • Can be handed over when you choose: Transferable, but each transfer is its own procedure — and if the account is in the child’s name, the 18th birthday decides again.
  • Can be optimised for tax: Every sale triggers tax. Switching costs you — and over 18 years you will switch.

Hendrik Bessembinder, “Do Stocks Outperform Treasury Bills?”, Journal of Financial Economics 2018 — every US share in the CRSP database since 1926.

Bitcoin

The big bet

1 of 4 met

The return is not the problem here. The fixed due date is.

  • Beats inflation over the long run: Historically by a wide margin — but with swings no savings goal with a fixed date can absorb.
  • Is reliably available on the day: Falls of 77 to 93 percent are the norm here. Whoever needs the money for university in the year of a drawdown does not have a return problem — they are missing three quarters of it.
  • Can be handed over when you choose: Handover depends on access to the wallet. Whoever holds the key holds the money — that is not an orderly handover.
  • Can be optimised for tax: Tax-free after a one-year holding period — but only if you do not switch. Every move restarts the clock.

Falls from the respective all-time high: −93% (2011), −86% (2015), −84% (2018), −77% (2022). Data series Glassnode, “BTC Drawdown from ATH”.

Property

Bricks and mortar

1 of 4 met

Sound for building wealth. As a child savings plan it fails on the day it is needed.

  • Beats inflation over the long run: Over long periods yes — that is the strength of the asset class.
  • Is reliably available on the day: You cannot sell a window. The average time on the market for apartments in the third quarter of 2025 was around 65 days; for houses, closer to 122 days up to the notary appointment.
  • Can be handed over when you choose: Transferable, but only as a whole and through a notary. You cannot carve out a part for the start of studies.
  • Can be optimised for tax: Sellable tax-free after ten years — but transfer triggers property transfer or gift tax.

Time on market: CBRE analyses of the German residential property market, quarterly data 2024/2025.

Broadly diversified ETF

The whole basket instead of one bet

4 of 4 met

The only candidate that meets all five points. Not because it is the most exciting one, but because it is built for exactly this job.

  • Beats inflation over the long run: Over 20-year periods the average annual return was historically just under 9 percent; from around 12 years on, there was no starting point in the past that ended in a loss.
  • Is reliably available on the day: Available every trading day, in any part amount. If your child needs 15,000 euros for a semester abroad, you withdraw 15,000 euros.
  • Can be handed over when you choose: Inside the policy the contract is in your name. You set the moment — at 18, at 25, or in stages.
  • Can be optimised for tax: Inside the policy you can switch funds without tax falling due. Tax applies only when money is taken out.

Deutsches Aktieninstitut, return triangle. Past performance is not a reliable indicator of future results.

None of these are bad. They are built for other jobs. For this job — 18 years, no attention, a fixed date — one is left standing.

The alternatives

Why do savings accounts, single shares and property fail?

Four ways of saving, four different reasons. The key point is always visible — the reasoning expands if you want it.

A savings account

The figure on the statement stays the same — what it buys shrinks every year.

Nominally safe is not the same as really safe

The statement always shows the same figure, and that is exactly what feels safe. What matters, though, is not the figure but what it can buy. Whenever interest sits below inflation, the balance loses value in real terms every year — quietly, without a minus appearing anywhere.

A worked example with round assumptions: at 1 percent interest and 2 percent inflation — the rate the European Central Bank targets for the euro area over the medium term — 10,000 euros are worth around 9,060 euros in real terms after 10 years. After 18 years, roughly 8,380. A good 16 percent of purchasing power gone, without a single euro missing.

For short-term money it is exactly right

This is not a rhetorical softener but our genuine advice: whatever you need in the next one to two years — the buffer for the broken washing machine, the reserve for a move — belongs in an instant-access account and nowhere else. There, availability counts, not return.

The only question is whether the same logic applies to money that will not be needed for 18 years. It does not — the two jobs pull in opposite directions.

And the catch few people think through

A children’s savings account is usually registered in the child’s name. That means full control passes over automatically on their 18th birthday, regardless of whether the timing works. This is not a detail but the point where the penny drops most often in our meetings. We gave it its own page: Why the policy is the right wrapper.

Individual shares

57.4 percent of all shares underperformed treasury bills over their lifetime.

Four percent of shares carry the entire gain

For his study “Do Stocks Outperform Treasury Bills?” Hendrik Bessembinder examined every single US share since 1926. His finding: 57.4 percent of all shares performed worse over their lifetime than short-dated government bonds — worse, in other words, than interest in a bank account. The entire net gain of the US stock market comes down to the best 4.3 percent of companies. More than half of that gain comes from just 0.33 percent — 90 firms out of more than 25,000.

Translated: if you pick a share blindly, the most likely outcome is that you do worse than with interest. You don't just need a good company — you need one of the rare exceptional ones. Eighteen years in advance.

And you would have to follow it the whole way

An individual share is not a savings plan, it is a position. It wants watching: quarterly figures, balance sheet, debt, competition, changes at the top. Nokia was untouchable in 1998. Kodak held the patent on the digital camera. Both were good companies — until they weren't, and faster than most investors reacted.

For a child's savings that is the wrong division of labour. You want to look after your child, not after quarterly reports.

And even good professionals rarely manage it

This is not a question of amateur versus professional. The SPIVA report by S&P Dow Jones measures exactly this: 93 percent of actively managed eurozone equity funds failed to beat their benchmark over ten years. For German equity funds it is 76 percent, for emerging market funds 94 percent. Those are trained teams of analysts with full-time access to data you will never see.

If nine out of ten professionals don't beat the index — why try to beat it instead of simply buying it?

Bitcoin

Drawdowns of 77 to 93 percent are the norm here. An 18th birthday does not move.

Declines of 70 to 90 percent are normal here, not exceptional

A look at the four large downturns: −93 percent (2011), −86 percent (2015), −84 percent (2018), −77 percent (2022). From the November 2021 high of around 69,000 US dollars it fell to roughly 15,500 US dollars by the end of 2022.

Apply that to a family: someone who has saved for 15 years and needs the money for their daughter's studies in the year of the decline does not have a return problem — they have three quarters of their savings gone. And unlike an investor, they cannot wait for a recovery. An 18th birthday does not move.

There is no anchor

Behind a broadly diversified equity ETF sit companies that sell products, make profits and pay dividends. You can argue about whether a firm is overvalued — but there is revenue to measure it against. The price of Bitcoin derives entirely from what the next buyer is willing to pay. That can go very well for a very long time. It is simply not a basis for an obligation with a fixed due date.

And it would be a side job

Custody, keys, choice of exchange, tax treatment, news flow: crypto demands attention. The entire point of a child's savings plan is that it works for 18 years without attention.

Property

You cannot sell a window — and even a full sale takes 65 to 122 days.

You cannot sell it in pieces

At 18 your child might need €15,000 for a semester abroad. From an ETF savings plan you withdraw €15,000. From a flat you do not — you cannot sell a window. You can only sell all of it or none of it. And the alternative, a loan against the property, turns provision into a new liability.

And even “sell all of it” takes time

According to CBRE analyses, the average marketing period for condominiums in Germany was around 65 days in the third quarter of 2025 — and still over 90 days in the second quarter of 2024. For houses it is closer to 122 days until the notary appointment. That is the normal case in a functioning market, without price pressure.

A semester fee is due in three months, not in four to six. And selling under time pressure means selling badly — the most expensive way to reach your own money.

Plus the effort nobody budgets for

Tenant changes, maintenance, owners' meetings, service charge statements, finding tradespeople. A property is a second job. For many families it is worth it — but it is something other than a savings plan that runs in the background.

And the concentration risk

A flat is one object, in one city, in one country, in one economic cycle. That is the same bet as an individual share, only with more paperwork. A global ETF spreads exactly that risk across thousands of companies in dozens of countries.

The answer

What is an ETF — and why does it fit a child?

An ETF (exchange traded fund) is a stock-exchange-listed index fund. It does not try to beat the market. It mirrors it.

The basket

Picture a large basket. In it sit the 1,000 to 1,400 largest companies in the world — the ones your family uses every day: Amazon, Apple, Coca-Cola, Nestlé, Siemens. With an ETF you do not buy one of those shares. You buy the whole basket, in one step, from a few euros upwards.

The basket heals itself

This is the part most people underestimate. An index is not a fixed list. If a company loses relevance it drops out according to fixed, publicly documented rules, and the next largest moves up — automatically, without anyone having to make a decision. You do not have to work out which company will matter in ten years. The index follows on its own.

Which is why time is the real lever

The Deutsches Aktieninstitut has published its “return triangle” for the German equity market for decades. The central finding: over 20-year holding periods the average annual return was historically just under 9 percent — and over periods from about 12 years upwards there was not a single starting point in the past that ended in a loss. Not because equities are safe, but because length evens out fluctuation.

With children's savings you have been handed that length. From birth to adulthood is 18 years; to the start of a career, closer to 25. Not using that time means giving away the one advantage in saving that money cannot buy.

Costs are the only thing fixed in advance

Nobody knows the return of the next 18 years. Ongoing costs, by contrast, are fixed and deducted every year, whatever the markets do. An ETF tracks an index instead of paying a team of analysts, which is why its ongoing charges sit markedly below those of traditional actively managed funds. Over 18 years that is not a detail but one of the few levers with which you can reliably influence the final amount.

Segregated assets: the fund is separate from the provider

An often overlooked point, especially for families from countries with less stable financial systems: an ETF’s assets are held by a depositary, separately from the fund company’s own assets, and do not form part of its insolvency estate should it fail. This separation applies across the EU to every UCITS fund — and the ETFs we use are UCITS funds.

Who owns the units, however, depends on the wrapper. In your own securities account they belong to you directly. In an ETF policy the insurer owns the units. You hold a claim under the insurance contract against the insurer — but no direct claim against the fund company or the depositary. That claim is backed by the Anlagestock, a ring-fenced division within the insurer's Sicherungsvermögen (§ 125 (5) VAG), from which policyholder claims are met first in an insolvency, and by the Protektor guarantee fund, which also takes over unit-linked portfolios. Both routes are insulated from provider risk — through different mechanisms. How that works for the policy.

~ 1,400

companies in one basket

if one fails, the next moves up

⌀ 9.7 %

return per year — historically*

MSCI World over decades — no guarantee

0 €

effort in daily life

the basket maintains itself by fixed index rules

*Long-run average of the MSCI World. Past performance is not a reliable indicator of future results — how we calculate.

Time beats timing

What if you had started at the worst possible moment?

The most common worry in a first call is not the return, it is the timing: what if we start right now and it goes down?

Try it. Move the slider to the year you would have started in and see what 100 euros a month would have become by today — including January 2000, right before the dot-com bubble burst.

2000
Jump to:
Paid in
30,000 €
Value at the end of 2025
130,259 €
Return per year
10.3 %
25 years of saving
Value of the savings plan Paid in

The years in which the green line sits below the paid-in line are real — and they were long. Whoever started in 2000 spent stretches of more than a decade in the red.

And the end result is still a plus. Not because of the entry point, but in spite of it. That is exactly why a child savings plan is the one investment where timing matters least — the 18 years are a given.

The same figures to read up on — saving started in 2000, 100 € per month.
Until the end of Paid in Value Return per year
2005 6,000 € 7,360 € 8.1 %
2010 12,000 € 14,270 € 3.4 %
2015 18,000 € 34,835 € 8.3 %
2020 24,000 € 64,346 € 9 %
2025 30,000 € 130,259 € 10.3 %

Source: Deutsches Aktieninstitut, MSCI World return triangle for monthly investing, as of 31 December 2025 (data: MSCI Inc.). The calculation uses the gross variant of the index and excludes costs — which is why these figures sit above the 9.7 percent we use for projections elsewhere. Past performance is not a reliable indicator of future results.

Illustrative model calculation based on an assumed, constant rate of return. It is neither a forecast nor a promise. Past performance is not a reliable indicator of future results. Investments involve risk.

Try it out

How long would you have had to hold on?

The year 2000 was a single starting point. Which raises the obvious question: was it just a freak case?

Here you can see all of them at once. The slider sets the holding period, and below it sits every start date the data holds for that length. Green means it ended up. Red means it ended down. Drag it up from one year and watch.

18 years

Not one starting point ended down — all 8 finished in the black.

2000 2001 2002 2003 2004 2005 2006 2007
Worst start
7.4 %

Started saving in 2000

Middle start
10.3 %

half did better, half did worse

Best start
12.5 %

8 possible start years in the data

From ten years on, nothing is red any more. Over 18 years — the time you have anyway with a child — even the worst possible start still came out at a good 7 % a year.

Two things keep that number honest. The longer the holding period, the fewer start years fit into the data, so the sample size always sits next to it. And the past is no promise about the future.

Deutsches Aktieninstitut, MSCI World return triangle for monthly investing, as at 31 December 2025. Gross index variant, before product and dealing costs — which is why these figures sit above the 9.7 % we use for projections elsewhere.

Now with your own numbers

Set your monthly amount and your child’s age — the calculation follows instantly.
Age Amount paid in Bank / adviser ETF4Kids
18
25
35
Amount paid in
Capital with a bank or traditional adviser (2%)
Capital with ETF4Kids (9.7%)

Illustrative model calculation based on an assumed, constant rate of return. It is neither a forecast nor a promise. Past performance is not a reliable indicator of future results. Investments involve risk.

You have done the maths. Now the honest part.

Every calculator assumes a steady climb — which never happens. In the clarity call we work through your full situation, your timing and the scenario where it does not pay off. Free and without obligation, in English.

Book your free clarity call
Who writes this

Licensed intermediaries — and parents ourselves

ETF4Kids is a financial and insurance intermediary based in Stuttgart, licensed under § 34d, § 34f and § 34i of the German Trade Regulation Act and supervised by the Chamber of Commerce (IHK) Region Stuttgart. We have no products of our own and are legally obliged to advise in your interest.

Around 85 percent of the families we work with are international — advice, documents and meetings in English are the norm here, not an exception.

This page was written by Nabil Khan (M.Sc. Economics and Finance) and Erol Eren (B.Sc. Economics), both founders and managing directors.

1800 families we have already guided.
3078 children now have a structure in place.
5 stars on Google, from real reviews.

Sources

  • Distribution of individual share returns: Hendrik Bessembinder, Do Stocks Outperform Treasury Bills?, Journal of Financial Economics 2018 (Arizona State University). Covers all US shares in the CRSP database since 1926.
  • Active funds vs. index: S&P Dow Jones Indices, SPIVA Europe Scorecard. Published twice yearly, measuring active funds against their respective benchmarks.
  • Bitcoin drawdowns: Glassnode time series “BTC Drawdown from ATH”; price data for the November 2021 high (~USD 69,000) and the 2022 low (~USD 15,500).
  • Property marketing periods: CBRE analyses of the German residential market, quarterly data 2024/2025.
  • Long-term equity returns: Deutsches Aktieninstitut, DAX return triangle, updated annually.
  • Savings-plan returns in the entry point simulator: Deutsches Aktieninstitut, MSCI World return triangle for monthly investing, as of 31 December 2025 (data: MSCI Inc.). Calculated using the gross variant of the index and excluding costs.
  • Driving licence costs: ADAC comparison data and surveys by the German driving instructors' association.

Risk warning: Past performance is not a reliable indicator of future results. Investments involve risk. This page is general information and does not replace advice tailored to your personal situation.

Frequently asked questions about ETFs

What happens if companies in the index go bankrupt?

They are removed from the index according to fixed rules and replaced by the next company. Nothing happens on your side — no sale, no decision, no tax. The basket maintains itself.

Isn't an ETF risky too? Equities fluctuate.

Yes, an ETF fluctuates. The difference is the kind of risk: with an individual share the value can go to zero permanently, because a company disappears. A broad index cannot do that — the 1,400 largest companies in the world would have to disappear at once. What remains is fluctuation. And fluctuation is a short-term problem, not a long-term one.

How much do I need to save each month?

Less than most people think — and that is the wrong first question. What matters is the time horizon: a small contribution over 18 years beats a much larger one over five. The right first question is: when do we start?

Can't I just do this myself?

Picking the ETF is the easier part. The question that decides the outcome comes before it: in which structure you save, in whose name, with what access, and what happens at 18. That is exactly what the Clarity Call is for.

At what age is an ETF savings plan worth starting for a child?

The earlier the better — but not for the reason most people assume. It is less about return than about length: over periods from roughly twelve years on, there was historically no starting point that ended in a loss (Deutsches Aktieninstitut, return triangle). Start at birth and you have that length for certain. Start at ten and it is tight. Start at fifteen and you should think about a different structure — the deadline then sits too close to the volatility.

Which ETF is suitable for a child?

A smaller question than it looks. Three properties decide it: the broadest possible diversification (a global index rather than a sector or a single country), low ongoing costs and accumulating, so distributions are reinvested automatically.

Whether the specific ETF then comes from iShares, Vanguard or another provider changes surprisingly little. Far more important than picking the ETF is the wrapper it runs in — that is the subject of Why the policy is the right wrapper.

Savings account or ETF for children — which is better?

They solve different jobs, which makes "better" the wrong question. Money needed in the next one to two years belongs in an instant-access account, where availability counts.

For an 18-year horizon it is the wrong choice: when interest sits below inflation, the balance loses in real terms. At 1 percent interest and 2 percent inflation that is around 16 percent less purchasing power over 18 years — the figure on the statement stays the same, what it buys does not.

What happens to the savings plan when my child turns 18?

That does not depend on the ETF but on whose name the contract is in. If it is in the child’s name — as is usual for a junior account or children’s savings account — full control passes over automatically on their 18th birthday, whether the timing works or not. If it is in yours, you decide when to hand over.

It is the biggest difference between savings vehicles and the reason for a page of its own: Why the policy is the right wrapper.

What does 100 euros a month become by the 18th birthday?

Over 18 years you pay in 21,600 euros. What it becomes depends on performance and cannot be promised to anyone.

For orientation, a worked example: with an assumed, constant gross return of 9.7 percent per year (source: Finanztip, MSCI World net in euro terms, 1975–2024) and after the real product costs, the model arrives at roughly 45,000 euros. A calculation that leaves costs out would show about 58,500 — a gap we show openly on the policy page.

Illustrative model calculation, neither a forecast nor a promise. Past performance is not a reliable indicator of future results.

What is the difference between an ETF and a fund?

An ETF is a fund — just one that does not pay a manager to pick shares. It tracks an index instead: a publicly visible list with fixed rules. That makes it considerably cheaper.

And it is the reason it usually comes out ahead over the long run: after costs, very few actively managed funds beat their benchmark over long periods (S&P Dow Jones Indices, SPIVA Europe Scorecard). Both, incidentally, are segregated assets: the fund’s holdings are kept apart from the fund company’s own and do not fall into its insolvency estate.

The foundation

What is the money for later?

For whatever comes up. A savings plan ties the capital to no purpose: it can be education or a semester abroad, a deposit on a first home — or the base of a pension that starts decades earlier than the parents’ did. That freedom of choice is the real value, and it demands two things: available at any time and handed over at a moment you choose.

The second point is gaining weight. On 20 April 2026, German Chancellor Friedrich Merz told the banking association’s anniversary reception: “The statutory pension alone will at best be no more than basic provision for old age.” He called for funded occupational and private provision on a “far larger scale”.

That was a statement about pension policy, not about children’s savings — but it describes the situation your child is growing into. Investing today builds exactly the pillar he was talking about. With the difference that 18 years of head start cannot be bought later.

Quotation: Friedrich Merz, banking association anniversary reception, Berlin, 20 April 2026, as reported by t-online; translated from the German.

The ETF is the engine. Now for the wrapper.

Which ETF you end up with is the smaller question. The bigger one is the form in which you hold it — because that determines tax, flexibility and control over the capital.

In which form? Why the policy keeps you in control
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