A child’s account.
Whose money, which goal?
Saving for education, a first home or retirement? The goal helps determine whose name the account should bear and how freely the money should be available later.
Three options with different purposes
Similar names do not mean identical rules. Crucially, a child allowance in a parent’s retirement contract is not an asset belonging to the child.
| Question | Ordinary child’s account | Parent’s retirement contract | Frühstartrente · draft |
|---|---|---|---|
| Whose name? | Child | Eligible parent | Child |
| Intended purpose? | Building assets, e.g. for education | The adult’s retirement | The child’s retirement |
| Automatic funding? | Opening alone gives no retirement allowance | Requires eligibility and a qualifying contract | Subject to proposed eligibility and contract rules |
| Unrestricted at 18? | The adult child generally decides | No general unrestricted withdrawal | State-funded capital and its returns normally remain restricted |
Sources: Section 2 BGB · Legal adulthood · BMF · Private retirement savings · Draft legislation · 21/7864
Accounts, cash and savings plans — simply explained
An investment account is a digital shelf for securities. Its linked cash account holds the money used for purchases and receives sale proceeds. A savings plan is a regular buying instruction, for example monthly.
A children’s or junior account usually means a securities account in a minor’s name. Parents manage it as legal representatives. An account in a parent’s name, merely earmarked mentally “for the child”, initially belongs to the parent.
The ownership decision matters more than a sign-up bonus. Write down who should own the money, when it will be needed and who should decide how to use it.
Sources: Section 1629 BGB · Representation · ING · Opening a junior account (provider example)
Save as a family, keep ownership clear
Who opens it and who contributes?
With joint parental responsibility, parents generally represent the child together. Sole responsibility requires different evidence. Being a grandparent does not automatically confer authority to represent the child. Coordinate opening and the provider’s required documents with the legal guardians.
Grandparents can contribute. Ask the bank how third-party payments are accepted and allocated. Authority to open an account, viewing access and permission to contribute are different things; do not share login credentials.
A gift belongs to the child
Money validly gifted to the child is not an unrestricted family reserve. Parents manage the child’s assets under the rules of prudent asset management. Clarify legal consequences beforehand for large gifts, special conditions or disputes over how the money may be used.
Turning 18 changes who controls the account
At adulthood, the child generally controls their ordinary account. A verbal understanding “only for university” does not replace a legally effective restriction. Plan a handover conversation about risk, passwords, taxes, documents and the purpose of saving.
Sources: Section 1629 BGB · Representation · Section 1642 BGB · Asset management · Section 2 BGB · Legal adulthood
What are you buying — and what could go wrong?
A share is an ownership interest in a company. A fund pools investments. An ETF is a fund traded on an exchange; many track an index. “ETF” alone does not tell you how diversified or risky the investment is. Check what it actually holds.
- Single companies, narrow sectors and individual countries can create concentrated risk. Many similar holdings do not automatically provide good diversification.
- A long saving period does not eliminate losses. Markets can fall shortly before the intended sale.
- Money needed on a fixed date needs a plan for the final years before use. When should risk be reduced?
- Dividends, distributions and reinvestment differ. An accumulating fund reinvests returns within the fund; this does not automatically make it tax-free.
- A savings plan is a process, not a guarantee. Check whether you can pause or change contributions without unnecessary fees.
Practical starting point: establish your goal and time horizon, then choose investments and contributions. Do not rely solely on past returns or prominent advertising.
Sources: ING · Opening a junior account (provider example) · Section 20 EStG · Investment income
Costs, taxes and other consequences
Look at costs in euros and percentages
Record custody fees, savings-plan and order charges, ongoing product costs, spreads and selling fees. For example, €30 in fixed annual costs is 5% of €600 in annual contributions, before fund costs. This compares costs; it is not a return forecast.
Ask about charges after the child turns 18, when a promotion ends and when transferring the account. Check “free” separately for each cost category.
Tax belongs to the child, not automatically to the parents
In an ordinary child’s account, dividends, interest and realised gains may be taxable. The child has an annual savings allowance of €1,000. Exemption orders across several banks must not exceed it in total. Whether a non-assessment certificate is useful depends on all income.
Gifts, account transfers and large amounts can raise additional tax questions. Keep payment records, acquisition data and tax certificates. Do not apply retirement-contract tax benefits to an ordinary child’s account.
Consider other benefits
The child’s regular income can matter for statutory family health insurance. Before large sales or distributions, ask the insurer how income is assessed and which current limits apply. Personal assets may also matter for later means-tested benefits.
Sources: Section 20 EStG · Investment income · Section 10 SGB V · Family health insurance
The Frühstartrente is not an ordinary child’s account
The Frühstartrente is in the legislative process. The following points describe the proposal; they do not promise funding for a child’s account opened today.
- The proposal provides €10 monthly from age six until adulthood. Entry is planned for 2027 with the 2020 and 2021 birth cohorts, retrospectively from 2026 for the 2020 cohort. Older cohorts would not receive Frühstartrente funding.
- Individual funding requires a certified standard retirement contract in the child’s name. An ordinary junior account is insufficient.
- State funding would go into only one contract per child. Parents and grandparents can contribute additionally; private contributions together are capped at €6,840 annually.
- Personal contributions are not required for the state’s €10. Third-party contributions do not give that contributor their own special-expense deduction.
- State-funded capital and associated returns would normally remain restricted until at least 65. Private contributions and their returns are treated separately; assess withdrawal, contract rules and taxation together.
- A collective investment arrangement is proposed when no individual contract is opened. It would not accept private contributions. Funding should therefore not depend solely on parents opening an account.
- The qualifying standard contracts propose effective costs capped at 1% during accumulation, with no acquisition or distribution charges before age 18.
Money needed for education or driving lessons and retirement assets subject to long-term restrictions should remain separate goals. Check the final rules and actual contract terms once products are available.
Sources: Draft legislation · 21/7864 · BMF · Frühstartrente
Before opening: nine questions for the family and bank
- Set the goal: education, unrestricted asset building or retirement? When will the money be needed?
- Decide ownership: the child’s account or your own account with a later gift?
- Identify legal guardians and required documents: identification, tax ID, birth certificate and, if applicable, evidence of parental responsibility. The provider determines the exact list.
- Check the bank and custody: who holds the securities, who holds the cash and who handles problems?
- Save the fee schedule: recurring charges, product costs and terms after promotions end or the child reaches adulthood.
- Understand the investments: diversification, risk, holding period and sale options. Avoid products you cannot explain.
- Organise contributions: regular amount, grandparents’ payments, ownership allocation and records.
- Review annually: costs, tax instructions, changed circumstances and the remaining time horizon.
- Prepare for handover at 18: review access, documents and financial knowledge together.
Sources: ING · Opening a junior account (provider example) · Section 1629 BGB · Representation
Go to the detailed retirement checklist → · Read common misconceptions →