No More Child Savings Accounts: Why Parents Are Turning to ETF Investments

We are all familiar with savings accounts for children: the supposedly ideal gift for parents who want to enable their children to make long-term investments. Unfortunately, however, they are no guarantee of financial success, especially in the current low-interest environment. 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.

Savings accounts for children are not a bad start in life, but if you want to invest your child's money for the long term, there are better options. The child's long investment horizon plays a key role here.

In most cases, the money represents an investment in the child's future, and the child should only use the money once 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 child portfolios.

● Diversify: Instead of selecting individual stocks, it is advisable to cover different asset classes, economic sectors, and regions of the world and to remain invested over several economic cycles. After all, no one knows who tomorrow's winners will be. Exchange-traded funds (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 compound interest effect comes into full play.

● 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 a child's money, but don't feel like dealing with funds and ETFs? Then a digital wealth manager like True Wealth is just the thing for you. It does all the work by creating and monitoring the portfolio. It keeps it on track with the help of rebalancing.

All you have to 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 child's portfolio in the name of the child. 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 actually reach the child.
● Securities do not have to be transferred or liquidated when the child 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 access to their account. With their own login, young people can adjust the investment strategy – but every change must be confirmed by the parent. The child can also see the performance of their portfolio 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 live 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 for the child portfolio. 

True Wealth – Switzerland's leading digital wealth manager

With over 45,000 satisfied customers and more than 2.9 billion francs in assets under management, True Wealth is Switzerland's leading online wealth manager. Founded in 2013 by Felix Niederer and Oliver Herren, the fintech company is licensed as a manager for collective assets and is subject to direct supervision by Finma.
The annual all-in management fee is 0.25 to 0.50 percent, depending on the investment amount. The minimum investment amount for a child portfolio is 1,000 francs.

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