Savings Account Or ETF For The Children? What Parents Should Know

ETFs (Exchange Traded Funds) are the modern alternative to the good old savings account. This was originally the preferred method of saving money for the children’s future. But if you think realistically, you will soon realize: Given today’s interest rates, the child can access either 20,000 or 100,000 euros at the age of 20.

ETFs are particularly attractive from this point of view. They can be seen as the modern version of a savings account – with the difference that they are traded on the stock exchange. “Many parents think that stock market trading is too risky or requires special knowledge. But there are numerous ways to take a low-risk approach – with the right strategy,” says Dr. Carmen Mayer. She became a millionaire through stock market trading and also uses her expertise to save money for her children for the future. Below, Mayer explains what parents should bear in mind for the stock market savings account 2.0.

An exchange traded fund (ETF) is a type of investment fund and a financial product that allows investors to invest in a wide range of assets such as stocks, bonds, commodities or other asset classes. ETFs are traded on stock exchanges like shares and can track the value of an underlying index, asset class or commodity. They are considered a much more sensible alternative to the classic savings account. There are many reasons for this:

  • Diversification: ETFs offer broad diversification as they hold a variety of assets within their portfolio. This helps to spread risk and minimize the potential for losses due to the failure of individual investments.
  • Stock market trading: ETFs can be bought and sold during trading hours on stock exchanges like shares. This allows investors to enjoy flexibility and liquidity as they can trade their shares at current market prices.
  • Transparency: ETFs publish their portfolios daily so that investors know exactly which assets they are investing in. This transparency allows investors to make well-informed decisions.
  • Low costs: ETFs generally have low management fees, also known as expense ratios, compared to active investment funds.
  • Flexibility: ETFs offer investors the flexibility to invest in different asset classes or sectors, depending on their individual investment objectives and strategies.
  • Liquidation: ETFs can be sold at any time – if the provider is chosen correctly – so that investors can quickly access their invested capital when they need it.

However, in order to really benefit from the advantages of ETFs, you should not invest blindly. Parents should pay much more attention to the following aspects.

Choose a broker with low fees

Brokers are service providers that facilitate trading in shares or ETFs. However, there are now many providers on the market. It is therefore advisable to pay particular attention to the fees charged when making your choice. The higher the fees, the lower the profit. In addition, customers have more flexibility if they can access their invested money at any time without incurring immense losses due to the fees.

Investing in the global power

History shows: If you have power, you can make a lot of investments. This results in a good infrastructure, which in turn attracts more investors. This means that ETFs of global powers – currently the SMP 500 from America, for example – are also likely to be more lucrative than those containing international equities. However, it is important to keep an eye on global political developments in order to be able to react to changes in good time.

Plan your investments with foresight

For a successful strategy, it is essential to set a specific goal. Investing without a concrete plan can quickly lead to disappointing results. One possible point of reference, for example, is the US Dow Jones benchmark index with its average return of nine percent. With this figure in mind, various online tools allow you to run through several scenarios. For example, what would the profit be if you paid in 100 euros a month? If the ETF you have chosen is significantly lower, you should reconsider your strategy.

Acting strategically

The stock market is constantly on the move. These changes should be monitored closely. If the results are good, it is worth investing more. However, as soon as the momentum turns and begins to tilt, an exit may be the best way to minimize any losses.

ETF, investment fund

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