New parents are confronted with new questions every day. Does the stroller really need to have front suspension? Or will the baby sleep better if it shakes every now and again? Who knows?! And now, to top it off, the godparents or grandparents suddenly want to know if the baby already has a bank account?
Here are three answers about children’s accounts – so you can get back to the more important things in life.
A bank account for a baby?
Of course your baby can grow up just fine without a bank account. And you can keep gift money in a piggy bank at home. Nevertheless, it’s still a sensible and practical idea to open an account for your child while they’re still a toddler because you’ll have to open one sooner or later anyway. This way your child will gradually start learning how to handle a bank account early on. At the same time, as the administrator of their account, you’ll have the overview. On top of that, the cash deposits will grow thanks to interest rates. Of course, anyone who wants to give your child money can open an account for them.
What happens when your child becomes an adult?
So, my child will have free access to all their money overnight as soon as they turn 18? Quite likely. From the age of 18, your child will have all their money at their disposal, even if you or another relative have been managing the account. Discuss with them in advance how much money they can spend freely in the year when they come of age and how much will be transferred to their separate savings account. How much money can your child handle responsibly at the age of 18? 1,000 Swiss francs or even 10,000?
What kind of account is most suitable?
There are different types of accounts for children. Most young people’s and gift savings accounts are held in the name of the child. There are, however, gift savings accounts that can be held under the name of the person who opened the account – the child’s grandmother, for example. The money in such accounts still belongs to the account holder.
Another option is the so-called “investment fund account” – this combines the advantages of a savings account with those of an investment, allowing the child to benefit from high returns over the long-term.
Account for children: good to know
If you’d like to handle your child’s assets with as few complications as possible until they reach adulthood, we recommend a savings account for young people or a gift savings account in the child’s name. Children’s accounts offer better interest rates and are for saving, not for making regular withdrawals.
Because you have a longer deposit horizon, i.e. the money won’t be needed for a long time, an investment fund account might interest you. Consult an advisor at your bank to find out which solution suits you and your child.
UBS’s educational principles
This article was written in collaboration with educator Marianne Heller, who has years of experience in teaching financial education and debt prevention programs for children and young people.