How to Start Investing for Your Children: My Complete Guide
In two and a half months, I'm becoming a first-time dad. I'm absolutely buzzing about it, and being passionate about personal finance, I've already started planning how I'll invest for my little son from day one.
Here's what breaks my heart: I see too many parents leaving this decision way too late. Time is your biggest ally when investing for children, and waiting costs your kids serious money.
Whether you earn €30,000 or €300,000 a year, you can start investing for your children. It's not about making them millionaires overnight. It's about giving them options and a proper head start in life.
Why Starting Early Makes All the Difference
Let me show you something that'll blow your mind. With just €50 per month invested over 18 years, you're looking at roughly €23,000. But here's where it gets interesting.
Using compound growth (which I'll explain more below), that same €50 monthly can actually turn into €37,000 or more, depending on market performance. Start later? You're leaving serious money on the table.
The Cost of Starting Late: Real Numbers
| Scenario | Monthly Investment | Years Invested | Total Contributions | Final Portfolio Value | Money Lost by Waiting |
|---|---|---|---|---|---|
| Start at Birth | €50 | 18 years | €13,500 | €37,000 | - |
| Start at Age 10 | €50 | 8 years | €6,000 | €8,500 | -€28,500 |
| Start at Birth | €100 | 18 years | €27,000 | €75,000 | - |
| Start at Age 10 | €100 | 8 years | €12,000 | €17,000 | -€58,000 |
| Even with €10/month | €10 | 18 years | €2,700 | €7,500 | Still better than €0 |
The point isn't to hand them a massive check on their 18th birthday. It's about giving yourself and them options:
Help fund their university education
Provide starting capital for their first business
Give them a deposit for their first home
Transfer the entire portfolio to their name if they're financially responsible
I've seen parents downsize their homes or sell their own investments because they didn't plan ahead for their kids' education costs. Don't be that parent.
Setting Up Separate Investment Accounts (This Is Crucial)
I'm structuring my son's investments in a completely separate account from my own portfolio. Here's why this matters:
Psychological Benefits:
You never consider it "your" money
It brings joy watching it grow for them
No temptation to dip into it during tough times
Clear tracking of what belongs to whom
Practical Benefits:
Clean transfer when they're ready
Better tax planning opportunities
Easier to gift in stages if needed
Unfortunately, not many brokers offer dedicated children's accounts yet. Interactive Brokers is one platform that allows sub-accounts, which you can set up in your child's name and transfer later.
I'm planning a dedicated video about the best brokers for children's investing, so stay tuned for that.
What Should You Actually Invest In?
I'm not a licensed financial advisor, so this isn't financial advice. But here's what I'm personally planning for my son's portfolio:
My Top Two Recommendations
Option 1: S&P 500 ETF This is what I invest in for my own portfolio. It tracks the 500 largest US companies and has historically delivered solid long-term returns. I have an entire playlist about S&P 500 ETFs if you want to dive deeper.
Option 2: All World ETF Even more diversified than the S&P 500. If you really value global diversification, this might be your pick.
Why ETFs Over Individual Stocks
For children's portfolios, I strongly recommend ETFs over individual stocks. Here's my reasoning:
Set and forget approach: You're investing for 18+ years. You don't want to log in monthly to manage trades
Built-in diversification: Companies will rise and fall over two decades, but the ETF adjusts automatically
Lower risk: Perfect for money you absolutely cannot afford to lose
For your own portfolio? Go wild with individual stocks and risky plays. For your kids? Keep it steady and predictable.
Accumulating vs Distributing ETFs
For children's accounts, I'd go with accumulating ETFs every time. Here's why:
Dividends automatically reinvest
True "set and forget" approach
No need to manually reinvest payouts
Better compound growth over time
Should You Add Bitcoin to Your Child's Portfolio?
Bitcoin is actually my second-largest position after real estate, bigger than all my stocks and ETFs combined. But for my son's portfolio? Probably not.
Here's my thinking:
Why I Love Bitcoin for My Portfolio:
Massive growth potential
Hedge against inflation
I'm comfortable with the volatility
Why I Won't Use It for My Son:
Too much uncertainty over 18 years
Regulatory risks we can't predict
Single asset risk vs diversified ETFs
I want steady, predictable growth for him
If Bitcoin does incredibly well in my personal portfolio, I can always allocate some of those gains to his account later. But his core portfolio needs to be rock solid.
The Real Numbers: How Much Can You Actually Build?
Let me show you the real compound growth potential using our free calculator.
Scenario 1: €50/Month
Monthly investment: €50
Annual growth: 9% (historical S&P 500 average)
Annual increase: 5% (keeping up with salary growth)
Time period: 18 years
Result: €37,000
Scenario 2: €10/Month (Bare Minimum)
Monthly investment: €10
Same parameters as above
Result: €7,500
Even €10 monthly is better than nothing. That's less than a Netflix subscription.
Scenario 3: €100/Month
Monthly investment: €100
Same parameters
Result: €75,000
If you leave it until they're 20 instead of 18? That €100/month becomes almost €100,000.
The Cost of Starting Late
Here's what really hurts. If you wait 10 years and only invest for the final 8 years of their childhood:
€100/month for 8 years: €16,000
€100/month for 18 years: €75,000
Starting late literally costs your child €59,000. Don't let that be you.
My 4-Step System for Automated Children's Investing
Step 1: Open the Right Account
Choose a low-cost broker that allows dedicated children's accounts. Keep it completely separate from your personal investments.
Step 2: Automate Bank Transfers
Set up automatic transfers from your salary account to the investment account. This ensures you always have funds available.
Step 3: Set Up Recurring Buys
This is crucial. Set up automatic monthly purchases of your chosen ETF. If you have to do it manually, you'll forget, and that works against your child's portfolio.
Step 4: Choose Accumulating ETFs
Let dividends automatically reinvest. Once this system is set up, you literally don't need to log in for years.
Managing the Long-Term Mindset
Don't Panic About Market Crashes
You're investing for 18+ years. There will be multiple presidents, economic crises, and market crashes. The S&P 500 has survived all of this and continued growing long-term.
Increase Contributions Over Time
As your salary grows, increase your child's contributions too. In my calculator example, I assumed 5% annual increases. This makes a massive difference over time.
Avoid the Temptation to Trade
Don't try to time the market or pick winning stocks for their account. Dollar-cost average with boring, reliable ETFs. Save the exciting trades for your own portfolio.
What Happens When They Turn 18?
You have several options, and there's no right or wrong answer:
Full Transfer: Give them complete control if they're financially responsible
Staged Payments: Monthly payments if you're worried about them blowing it all
Education Fund: Use it specifically for university or trade school
Business Capital: Help fund their first business venture
Keep It Growing: Leave it invested until they're 25 or 30 if they haven't found their path yet
I've seen kids who aren't great with money, so transferring €75,000 all at once might not be wise. You know your child best.
Common Concerns and How I Handle Them
"What if they don't want to go to university?"
Perfect. They'll have starting capital for whatever path they choose. University isn't the only route to success.
"What if the market crashes right when they need the money?"
That's why we start early and invest in diversified ETFs. Even if there's a crash in year 18, you have years of compound growth as a buffer.
"What if I need the money for an emergency?"
This is exactly why you keep it in a separate account. It's not your emergency fund, it's their future. Keep your own emergency fund separate.
Frequently Asked Questions
How much should I invest monthly for my child?
Start with what you can afford consistently. €10 is better than nothing, €50 is a solid start, €100+ will build serious wealth. The key is consistency over 18+ years.
Which broker is best for children's investing?
I recommend brokers that offer separate sub-accounts or children's accounts. Interactive Brokers is one option. I'm creating a detailed comparison video soon.
Should I tell my child about their investment account?
This depends on their age and maturity. I plan to use it as a teaching tool as my son grows up, showing him how compound growth works.
What if I started late can I still make it work?
Absolutely. Starting at 10 is better than starting at 15. Even 5 years of investing can build a meaningful amount. Don't let perfect be the enemy of good.
Can I invest in multiple ETFs for diversification?
You can, but for children's accounts, I prefer simplicity. One solid all-world ETF or S&P 500 ETF is plenty. Save the complex strategies for your own portfolio.
What happens if the ETF stops trading or the company fails?
ETFs are generally very safe because they hold hundreds or thousands of companies. If an ETF provider fails, the underlying assets are protected. Choose large, established ETF providers.
Should I invest lump sums or monthly amounts?
Monthly investing (dollar-cost averaging) is perfect for children's accounts. It smooths out market volatility and fits better with most people's cash flow.
My Personal Plan Moving Forward
For my son, I'm starting with €100 monthly into an accumulating S&P 500 ETF. As my income grows, I'll increase the contributions. The account will be completely separate from my personal investments.
I plan to use this as a teaching tool, showing him how compound growth works as he gets older. By the time he's 18, he'll understand investing basics and can make informed decisions about his financial future.
This isn't about creating dependency. It's about giving him options and teaching him that money can work for him if he's patient and consistent.
The best time to start investing for your children was yesterday. The second-best time is today.
Remember, this portfolio isn't for you, it's for them. And there's no greater gift than giving your child a proper financial head start in life.
Risk Disclaimer: All investments carry risk, and past performance doesn't guarantee future results. The figures shown are examples based on historical market averages and shouldn't be considered guaranteed returns. Always do your own research and consider consulting with a qualified financial advisor before making investment decisions. The content above is for educational purposes only and not personalized financial advice.
Investing for Kids: How to Build Wealth from Day 1
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