Investing for Your Child: The Best Retirement Plan

Most parents save for their child in a savings account: for the driving licence, the first flat, maybe university. It's well meant, yet it gives away the biggest advantage your child has. Because your child has something you no longer have: time. A newborn has around 65 years ahead of them until retirement. Use that time with a broadly diversified equity savings plan, and small amounts build a retirement cushion your child could never catch up on as cheaply later, whatever their salary. We show you the maths, the legal pitfalls and how to get started in an hour.

The most unfair advantage in the world: 65 years of time

Let's take a simple scenario: from your child's birth, you invest CHF 100 a month in a global equity ETF. At 18 you stop paying in. After that, nobody touches the money until your child turns 65.

Over those 18 years you have paid in exactly CHF 21,600. Here is what it becomes, depending on the average annual return:

Our own calculation with monthly contributions and annual compounding, before taxes and inflation. The returns are assumptions, not a guarantee.

Look at the middle row. At 18 the portfolio is worth about CHF 34,500: nice, but not spectacular. The real work happens afterwards. Over the following 47 years the money grows tenfold without anyone paying in a single franc. That is compound interest in its purest form, and above all it needs one thing: time. Run your own numbers in the compound interest calculator.

A word on inflation: CHF 342,000 in 65 years won't buy as much as CHF 342,000 today. But equities are one of the few asset classes that have beaten inflation clearly over long periods. In a savings account, the money would shrink in real terms. How much inflation eats into your money is covered in Inflation & purchasing power in Switzerland.

Why this is the best retirement plan

The power of this idea only becomes clear in comparison. Suppose your child wants the same CHF 342,000 at 65 (at 5% a year) but only starts saving themselves:

• Starting at 25: about CHF 231 a month for 40 years. Paid in: over CHF 110,000.
• Starting at 35: about CHF 419 a month for 30 years. Paid in: just over CHF 150,000.
• Starting at 45: about CHF 843 a month for 20 years. Paid in: just over CHF 200,000.

You reach the same goal with CHF 21,600. No other retirement lever, neither Pillar 3a nor a pension fund buy-in, comes close. Not because the product is better, but because the start is earlier.

There's a second point: AHV is funded on a pay-as-you-go basis, and in the coming decades there will be fewer and fewer workers for every person of retirement age. Nobody knows what the first and second pillars will look like when your child retires. Capital of their own that grows independently of the system is therefore the most robust addition. How AHV works today is explained in Calculating your AHV pension.

And one more thing: a child who knows at 30 that there is already a solid base for retirement can make freer choices. Part-time work, further education, self-employment, a sabbatical. In FIRE jargon this is called "Coast FIRE": the wealth grows to the target on its own, and you only need to earn your running costs. More in our FIRE guide.

Where the money comes from: the child allowance

CHF 100 a month sounds like a lot when the family budget is already tight. But there is a source many overlook: the child allowance (Kinderzulage). In 2026 it is at least CHF 215 per month and child across Switzerland, and many cantons pay more. From age 16, during education or training, there is an education allowance of at least CHF 268.

If you route part of it, say CHF 50 or CHF 100, straight into the savings plan with a standing order, you'll hardly notice it day to day. How to set up your family budget so this works is covered in Create a budget.

Other sources worth using:

• Cash gifts from grandparents and godparents at birth, at Christmas or on birthdays. Many would rather give to a portfolio than buy another toy; you just have to ask.
• A starting amount at birth: CHF 5,000 invested once grows at 5% a year to about CHF 12,000 by 18 and about CHF 119,000 by 65.
• Small amounts count too: CHF 25 a month is a quarter of the table above. Better to start small than not at all.

Account in your child's name or yours? The key decision

Before you open a portfolio, you need to settle a question many parents underestimate: in whose name is the money held?

Option A: portfolio in the child's name. Legally, the money is then child's property (Kindesvermögen, Art. 318 ff. Swiss Civil Code). As a parent you manage it until the child comes of age, but it belongs to your child. You may use the income for the child's maintenance, upbringing and education. The capital itself, however, is only accessible in exceptional cases and usually only with the consent of the child protection authority (KESB). At 18 your child automatically gets full control over everything held in their name, even if they knew nothing about the portfolio until then.

Option B: portfolio in your name, earmarked for the child. You keep full control and decide yourself when and how much to give your child later, for example at 25 or 30. Legally, though, the money is your wealth. In a divorce it is part of the division of marital property, on your death it is part of your estate and it is open to your creditors.

There is no right or wrong. Option A is clean and protects the money unambiguously for your child. Option B fits better if you want a genuine "retirement pot" that your child won't spend on a car at 18. Many parents combine both; more on that shortly.

Taxes: no trick, but no disadvantage either

A common misconception: a portfolio in the child's name saves taxes. In Switzerland it doesn't. The income and wealth of minor children are attributed to the parents and taxed together with theirs (Art. 9 para. 2 Federal Direct Tax Act). The only exception is the child's own earned income, such as an apprentice's wage.

Otherwise the same rules apply as for your own portfolio:

• Capital gains are tax-free as long as you count as private investors. With a calm savings plan, that's clearly the case.
• Dividends and interest are taxable income, including for accumulating ETFs.
• Withholding tax of 35% on Swiss income can be reclaimed via the tax return.
• The portfolio counts as wealth and is therefore subject to wealth tax.

Gifts to your own children are tax-free in almost all cantons. Exceptions with allowances exist in Neuchâtel, Vaud and Appenzell Innerrhoden, for example. The details are in our article on Inheritance tax in Switzerland. If you have several children, keep the inheritance-law duty of equalisation in mind: larger gifts to one child are later credited against their share of the estate. The simplest approach is to treat all children equally or to put your intention in writing.

Pillar 3a for your child? Not yet

Pillar 3a would be ideal for taxes but isn't possible for children. Only people with AHV-liable earned income may contribute. That changes with the first wage, for example during an apprenticeship. From then on, your child can pay into Pillar 3a and benefits from the tax deduction as soon as they pay taxes of their own. Everything important is in the Pillar 3a guide.

Be careful with products sold as "child pension plans" or "savings insurance for your child". They are often life insurance policies with a savings component. They tie you in for many years, are more expensive, and early exit often costs money. Check the total costs carefully before you sign. For pure wealth building, a low-cost ETF savings plan is usually the more flexible solution.

Costs decide tens of thousands of francs

Over 65 years, even a small cost difference becomes huge. Let's rerun the example above with a lower net return, because higher fees take a bite every year:

• 5% a year (low-cost ETF): about CHF 342,000 at 65
• 4% a year (1 percentage point more in costs): about CHF 198,000 at 65

A single percentage point in fees costs your child over CHF 140,000 here. So the rule is: broadly diversified, low running costs, no expensive actively managed funds. Why one global ETF is often enough is explained in MSCI World vs. FTSE All-World.

How to start: six steps

1. Your own retirement first. As on a plane: put on your own oxygen mask first. An emergency fund and your own Pillar 3a come before the child's portfolio. Parents who depend financially on their children in old age help them least. How much reserve you need is covered in Build an emergency fund.
2. Choose an account option (child or you, see above).
3. Pick a broadly diversified, low-cost equity ETF. How that works is explained in ETF investing for beginners.
4. Automate with a standing order, ideally right after the child allowance is paid out. A step-by-step guide is in ETF savings plan with a standing order.
5. Separate two pots. An education pot for apprenticeship, university or driving licence that your child will need between 16 and 25. And a retirement pot that stays invested until retirement. If you split the CHF 100 in half, each pot holds about CHF 17,300 at 18. The retirement pot alone grows to about CHF 171,000 by 65 (at 5% a year).
6. Don't sell when markets fall. Over 65 years there will be several crashes. Those who don't sell benefit from the recovery. Your child's investment horizon is so long that short-term swings don't matter.

The savings goal calculator works out how much you need each month to reach a specific target.

The biggest gift is the knowledge that comes with it

Whichever option you choose, at some point your child will decide about their money themselves. At 18 at the latest with a portfolio in their name, or when you hand it over with a portfolio in yours. Whether CHF 34,500 becomes a solid retirement base or a new car depends on whether your child understands what they're holding.

That's why it pays not to keep the portfolio secret. From school age, show your child how their money grows. Explain compound interest with real numbers from their own portfolio. Let them have a say at 12 or 14. That way a savings plan becomes a piece of financial education that lasts a lifetime.

Frequently asked questions

Isn't it too risky to invest a child's money in equities?

In the short term, equities swing a lot; a loss of 30% in a bad year is possible. Over periods of 20 years and more, however, broadly diversified equity portfolios have historically done considerably better than savings accounts. Money needed in the next few years, such as the education pot from around age 14, is gradually shifted into safer investments. There is never a guarantee on the stock market.

What if my child simply spends the money at 18?

With a portfolio in their name, they're allowed to. The best protection is early financial education. If you want to be sure part of it stays invested until retirement, hold that retirement pot in your own name and give it later.

Is a children's savings account still worth it?

For short-term goals and as a first contact with money: yes. For long-term wealth building: hardly. CHF 100 a month at 0.5% interest comes to about CHF 22,600 at 18 and just under CHF 28,600 at 65, not even a tenth of what the ETF savings plan reaches in the middle scenario.

Conclusion: the best time is now

Investing for your child is not a question of income but of time. Just CHF 100 a month from the child allowance can grow over 65 years into a six-figure sum that your child could only match later with many times the effort. Sort out your own retirement first, decide consciously in whose name the portfolio is held, keep costs low and teach your child what they are being given. By the way, the second-best time to start is today, no matter how old your child already is.