Many parents in Switzerland want to set aside money for their children at an early stage. Whether for education, the first home or as a financial start into adulthood, long term saving can create an important foundation.
While savings accounts were often used in the past, more and more families today rely on an investment account for children. The reason lies in the higher long term return potential of equities or ETFs and in the powerful effect of compound interest.
Over long periods of time, compound interest can make an enormous difference. Those who start early benefit from the fact that returns are continuously reinvested and themselves generate further returns.
In this guide you will learn how an investment account for children works in Switzerland, which options exist and why compound interest plays a central role in long term wealth building.
Why an investment account for children is particularly worthwhile
A major advantage when investing for children is the long investment horizon. If parents start investing shortly after birth, the money can work for 15 to 20 years or longer.
Time is one of the most important factors in building wealth.
Through compound interest, so called returns on already generated returns are created. As a result, wealth grows faster and faster over time.
Example:
Monthly investment: 100 CHF
Investment period: 18 years
Average return: 5 percent per year
The total invested capital amounts to 21,600 CHF.
Through compound interest, this can grow to around 34,000 CHF.
With a compound interest calculator, it is very easy to calculate how regular investments can develop over many years.
What is an investment account for children
An investment account for children is a securities account that is opened in the name of the child. It can contain investments such as:
- Equities
- ETFs
- Funds
- Bonds
The parents usually manage the account until the child reaches legal adulthood.
However, the invested assets legally belong to the child.
Once the child becomes an adult, they receive full control over the account and can freely dispose of the money.
How to open an investment account for children in Switzerland
Many banks and online brokers in Switzerland offer special children’s accounts or junior investment accounts.
Typical process:
- Choosing a bank or broker
- Opening an account in the name of the child
- Management by the parents or legal guardians
- Regular contributions or one time investments
It is important that parents follow a long term strategy and invest the money in a broadly diversified way.
ETF savings plans for children
ETF savings plans for children are particularly popular.
ETFs track entire stock markets and enable broad diversification at relatively low costs.
Typical examples include ETFs that track:
- Global equity markets
- International indices
- Broad stock market indices
Regular monthly investments create long term wealth accumulation.
Even small amounts can have a large effect over many years.
With a compound interest calculator, parents can simulate how different savings rates or returns affect wealth growth over the long term.
The compound interest effect explained simply
Compound interest occurs when earned returns are reinvested.
As a result, not only the original contributions generate returns, but also the previously generated profits.
Example:
Initial capital: 5,000 CHF
Return: 5 percent per year
Investment period: 20 years
After 20 years, the investment grows to around 13,200 CHF.
Most of the growth occurs in the later years because the compound interest effect becomes increasingly stronger.
A compound interest calculator clearly shows how strongly time influences wealth building.
Tax aspects of children’s investment accounts in Switzerland
In Switzerland there are some tax specific characteristics.
The assets legally belong to the child. However, in many cantons they are taxed together with the parents as long as the child is a minor.
This means:
- Assets are declared in the parents’ tax return
- Investment income may also be attributed to the parents
The exact tax treatment can vary slightly depending on the canton.
What parents should consider when investing for children
When building an investment account for children, several points should be considered.
Long term strategy
Investments for children should be aligned with a long investment horizon.
Broad diversification
Wide diversification reduces risks and improves long term stability.
Pay attention to costs
Fees for account management or transactions can reduce returns.
Regular investing
Monthly contributions use the cost averaging effect and smooth market fluctuations.
How a compound interest calculator helps with planning
A compound interest calculator is a helpful tool for planning long term wealth accumulation.
With it you can calculate:
- how much capital may accumulate by the time the child reaches adulthood
- how different savings rates influence the outcome
- how strongly returns impact long term wealth building
Especially when saving for children, it clearly shows how valuable an early start can be.
Important to know
- An investment account for children legally belongs to the child
- Parents manage the account until the child reaches adulthood
- Long term investments benefit strongly from compound interest
- ETFs are often suitable for long term savings plans
- A compound interest calculator helps realistically plan wealth building
Summary
An investment account for children in Switzerland is an attractive way to build wealth over the long term. Through regular investments and broad diversification, parents can start building capital early for important life goals of their children.
The biggest advantage is the long investment horizon. The earlier investments begin, the stronger the compound interest effect becomes.
With the help of a compound interest calculator, it is easy to calculate how savings rates and returns may develop over many years. This clearly shows how even small amounts can grow into substantial wealth over time.
FAQs
A children’s investment account is a securities account opened in the name of the child and managed by the parents until the child reaches adulthood.
An account can be opened shortly after birth as long as the legal guardians approve it.
Many parents use broadly diversified ETFs or funds because they offer attractive long term return potential.
Due to the long investment horizon, compound interest can have a very large impact. A compound interest calculator shows how regular investments can develop over many years.
This depends on financial possibilities. Even small amounts can grow significantly over many years through compound interest.
Calculate compound interest
Calculate for yourself how your money can grow over the long term. Our compound interest calculator shows you in seconds the impact that time and return can have.
