Investing for Children: Here's How To Do It Right

We are all familiar with children's savings accounts: the supposedly ideal gift for parents who want to enable their children to make a long-term investment. Unfortunately, however, they are no guarantee of financial success, especially in the current environment of low interest rates. The account balance grows a little, but at best only as fast as the money loses value.

And that's not all: once the child reaches adulthood, they suddenly must pay account fees while interest rates continue to fall. Minus instead of plus.
Children's savings accounts are not a bad start in life, but if you want to invest your children's money for the long term, there are better investment options. The child's long investment horizon plays a key role here.

Golden Rules

In most cases, the money represents an investment in the child's future, and the child should not use the money until they reach the age of majority. In this case, investments in securities are suitable.

As with adult portfolios, there are a few golden rules for children's portfolios.

  • Diversify: Instead of picking individual stocks, it is advisable to cover different asset classes, economic sectors, and regions of the world and, ideally, to remain invested across several economic cycles. After all, no one knows who tomorrow's winners will be. Suitable exchange-traded ETFs reflect this diversification and are extremely cost-effective.
  • Start early: The earlier you start investing for your child, the more time they will have to grow their money. Even small amounts add up over time, and the power of compound interest comes into full effect.
  • Be patient: Investing requires a long-term goal. There will be ups and downs along the way. Those who invest for the long term have excellent chances of positive returns. Take advantage of the 18 years between your child's birth and coming of age.

The longer the investment horizon, the better the risk/return ratio. Returns come not only from potential price gains, but also from dividends and interest on securities.

Would you like to invest your own money or your child's money, but don't want to deal with funds and ETFs? Then a digital wealth manager like True Wealth is just right for you. It does all the work by creating and monitoring the portfolio. It keeps it on track with rebalancing.

All you must do is answer a few questions about your risk tolerance and investment goals. Based on this information, the online wealth manager selects the best ETFs and manages the portfolio automatically. The free e-tax statement also makes it easy to reclaim withholding taxes later.

This has several advantages:

  • You save time, effort, and costs.
  • You don't have to deal with investment instruments.
  • You can be sure that your portfolio is being managed professionally.

Digital wealth managers are more flexible and cost-effective than traditional wealth managers. Opening an account is easy via the app, and as a customer, you can access your money at any time.

Fair to the child

From the perspective of the child and the donor, it makes sense to open the children's account in the child's name. The assets belong to the child, even if they cannot dispose of them until they reach the age of majority, i.e., 18.

How the child benefits:

  • Friends and relatives can be sure that the money transferred will reach the child.
  • Securities do not have to be transferred or liquidated when the young person turns 18. The portfolio simply continues to run. This saves transaction costs and stamp duties.

Experience instead of learning 

Parents also decide whether the child or young person is given read-only access to their account. With their own login, young people can adjust the investment strategy – but any changes must be confirmed by their legal guardian. The child can also see how their portfolio is performing and can express their gratitude for deposits.

With their login, children and young people not only gain insight into decisions and transactions, but also into what is happening on the markets. They experience how the value of their assets fluctuates. They learn that this is normal on the markets – and that a well-diversified portfolio often recovers from temporary setbacks sooner or later.

Would you like to know more or get started right away?

→ Click here to go to the child portfolio.

True Wealth – Switzerland's leading digital wealth manager

With over 35’000 satisfied customers and more than 2 billion in assets under management, True Wealth is Switzerland's leading digital wealth manager. Founded in 2013 by Felix Niederer and Oliver Herren, the fintech company is licensed as a collective asset manager and is subject to direct supervision by FINMA.

The annual all-in management fee is 0,25-0,50 percent, depending on the investment amount. The minimum investment amount for a children's portfolio is CHF 1’000. Follow True Wealth on Instagram, LinkedIn, or X. Prefer to listen or watch? You can subscribe to the video podcast with Felix Niederer on Spotify and YouTube.