Talk – How parents invest and save for their children

Tatjana, welcome to Coffee Talk. I'm very pleased to have you here.

Thank you, Felix, for inviting me. I'm delighted to be here.

We surveyed around 1'000 parents of children under the age of 18 on the topic of «Digital Investing for Children». You have already supported or conducted several studies in this area. What sparked your interest in this topic?

My interest is both personal and professional. I have two children of my own, aged six and eight, and I was confronted with the question early on: how do I invest for my children? It was never a question of whether but of how. At the same time, I was concerned with how to impart financial education to my children. This is an essential topic. Professionally, I also conduct research in the area of digital investments. I found your solution, the digital ETF children's portfolio, to be innovative, which is why I was particularly interested in the study.

Were you surprised by the results of the study, or did they meet your expectations?

Both. Some results surprised me positively, others met my expectations.

Which results surprised you particularly positively?

Around 90% of the parents surveyed said they save or invest money for their children – an impressively high number. Many start as early as the child's first year of life, or even before they are born. This shows how important their children's financial future is to them.

As you would expect, most parents put their money in savings accounts, despite wanting to build up their assets. This highlights a paradox: while securities offer better long-term returns, only just over 20% of parents use them for their children.

Why do you think investing in securities is the better choice?

Because of the compound interest effect. In the long term, it enables exponential growth – an advantage that savings accounts do not offer. Those who invest over decades benefit from the market return and use their capital more efficiently. Those who leave their money in a savings account for a long period of time, on the other hand, forfeit this potential.

Why are many parents still hesitant to invest in securities?

A study by the Lucerne University of Applied Sciences and Arts and PostFinance has identified four main reasons:

1. Lack of knowledge – Many people find securities too complex and avoid them due to uncertainty.
2. Lack of interest – According to several studies, only a few people in Switzerland are interested in financial markets. Those who don't actively engage with it don't develop any trust.
3. Misconception of high barriers to entry – Many believe that securities are only suitable for the wealthy. However, even small amounts can be invested sensibly.
4. Loss aversion – People weigh losses more heavily than gains. Since securities are subject to fluctuations, this deters many.

This effect is even more pronounced when it comes to investments for children. Parents want to avoid risks, even if it means sacrificing long-term returns. But what's important is to ride out the fluctuations. Automated solutions can help to remove emotions from the decision-making process.

Maybe you shouldn't look at the portfolio too often. People who check the returns daily are doing themselves a disservice.

Exactly. Myopic loss aversion describes the phenomenon: the more often you see losses, the more emotionally you react. People who look at their portfolio every day often make irrational decisions. In the long term, it's better to stay invested and ride out the fluctuations.

Another surprising result of the study was the question of whether parents prefer an account in their own name or in the name of the child. I would have expected parents to invest the money in their own name. In fact, many prefer an account in the name of the child.

This is a key legal aspect. It makes sense for the money to be legally owned by the child and clearly separated from the parents' finances. This offers decisive advantages in various scenarios – such as in the event of divorce, inheritance or family disputes. The assets remain fully reserved for the child and can only be used for their future.

How can parents teach their children how to handle money?

Studies show that many parents teach their children about money through pocket money and conversations – proven methods that impart basic financial skills. When a child receives their first pocket money, they learn to live with a fixed budget and to plan expenses. However, what is often missing is an understanding of how to grow money – an essential part of financial education.

Interactive approaches are particularly valuable here. When children can follow the development of their own portfolio, they gain practical insights into investing. Learning by doing is particularly effective in this area. It would therefore be desirable to have more playful and interactive apps that convey financial knowledge in an understandable way – similar to educational apps in schools, such as the Anton app.

We have deliberately integrated a function into our solution that allows parents to give their child their own login as soon as they are capable of making decisions, around the age of 14 or 16. This allows the child to view their portfolio independently: how is my money invested? What return has been achieved? The ability to actively track one's own investment promotes financial understanding.

That's exactly what I mean by interactive learning. Learning by doing is the most effective method – not just for children, but for everyone. Those who actively experience how something works understand it better, ask specific questions and learn more sustainably. Children often have a natural curiosity and openness that many adults lose over time. It is important to take advantage of this interest.

My eight-year-old child recently watched with great interest as his father did his tax return. Where adults think, «Thank God I don't have to do that,» a child asks, «What is that? Why are you doing that?».

This natural curiosity is an opportunity for financial education. Unfortunately, the topic is often neglected in schools. Many young adults only come into contact with investments for the first time when they start their studies or start their professional life. This is too late. Parents should start early and teach financial topics in a playful and interactive way.

If you could give two or three tips for parents, what would you advise them when it comes to investing for children or with children?

1. Start early – The longer the money remains invested, the stronger the effect of compound interest. Children have a long investment horizon, which makes investing in securities particularly attractive.
2. Involve children – Solutions that enable children to track their investments promote financial literacy and personal responsibility.
3. Educate yourself – Parents should research investment options to make informed decisions. There are now many attractive solutions available that go beyond traditional savings accounts.

Tatjana, thank you for the conversation! And thank you to all our listeners and viewers – see you next time!

• Find out more about the True Wealth Child Portfolio.
• Want to know more about the study? You can find the full report here.