Anyone saving for their child faces a basic question: should the money be in the child's name, or stay in the parents' account, reserved for the child only in their minds? Both routes have clear pros and cons.
Option 1: the child's account
The account is in the child's name. The parents manage it until the 18th birthday.
Advantages:
- The child has their own allowances. Capital income up to 13,384 € a year usually stays tax-free.
- The money is clearly separated from the parents' assets.
- Grandparents and godparents can pay in directly.
Disadvantages:
- The money belongs to the child irrevocably. Parents may not use it for themselves, not even in an emergency.
- From 18 the child alone decides about the money.
- The assets may count for student aid and family health insurance.
Option 2: the parents' account
The parents save in their own account and keep the money earmarked for the child.
Advantages:
- Full control: the parents decide when and for what the money is spent, even after the 18th birthday.
- Flexible in emergencies.
- The assets do not count for the child's student aid.
Disadvantages:
- Tax: if the parents' own saver's allowance (1,000 €, 2,000 € for married couples) is already used, 26.375 % flat tax plus possibly church tax is due.
- The money is not protected from third parties, for example in a divorce or if the parents have debts.
What does the tax actually cost?
With 100 € a month from birth, 6 % return and 0.2 % costs, the account grows to about 37,349 € by 18. In the child's account, 0 € tax is due. In the parents' account without a free allowance, it is about 2,908 €.
If the parents still have their allowance free, the difference shrinks. With 50 € a month and 1,000 € of free allowance, the parents pay only about 697 € instead of 1,454 €, for example.
The mixed approach
Many families combine both routes: part of the money goes into the child's account, for example for the driving licence or the start of university. Another part stays in the parents' account as a flexible reserve. That way you use the child's allowances and still keep control.
Which suits you?
The child's account suits you if you want to give the money to the child for sure and do not need a reserve for yourself. The parents' account suits you if you want to stay flexible or worry that your child may not handle a large sum responsibly at 18.
In the calculator you can see both options side by side with your own numbers. Set the parents' free saver's allowance at the bottom of the input panel.