Optimal protection and savings strategies: How to secure your child's financial future
27.03.25
4
Minutes
Katrin Straub
Managing Director at nextsure
Financial provision for children is a matter close to many parents’ hearts. But which insurance policies are really necessary, and how can you save effectively for the future? This article shows you practical ways to do just that.
The topic in brief and concise terms
An early and well-considered combination of essential insurance policies (liability, health, parents’ term life insurance) and long-term saving strategies (e.g. ETF savings plans from €25 per month) lays the foundation for your child’s financial security.
Specific supplementary insurance policies such as children’s accident cover, dental supplementary cover or an early income protection policy can close important gaps and protect against high costs; assess the need on an individual basis.
Take advantage of tax benefits by holding savings investments in the child’s name and making full use of allowances (saver’s allowance of EUR 1,000, basic allowance); regular review and adjustment of the strategy is essential.
Laying the foundations: Essential insurance for children
Basic cover for children starts with just a few but crucial policies. Private liability insurance is essential, as children are considered incapable of liability until the age of seven. Parents are often liable for damage caused by them if the duty of supervision was breached. Many family plans cover children who are not legally responsible up to a sum of, for example, EUR 50,000. Health insurance is compulsory in Germany; children are usually included free of charge in their parents' statutory family insurance. Term life insurance for the parents secures the children's financial future if a breadwinner dies, and should cover at least three to five gross annual salaries. These basic protections create an initial safety net. The next step is to look at specific risks and options for provision.
Health in focus: Benefit from accident cover to dental prevention
Besides basic cover, specific health insurance policies are worth considering. A private children’s accident insurance policy provides benefits in the event of disability caused by an accident, which is particularly important because statutory accident insurance usually only covers accidents in nursery, school and on direct routes. Experts recommend insured sums of at least 100,000 euros in the event of 50 per cent disability. A dental supplement insurance policy for children can be worthwhile, as orthodontic treatments can quickly cost several thousand euros. Statutory health insurance often only covers costs for severe misalignments (KIG three to five) and even then only for standard treatments. Many families underestimate the additional costs of modern treatment methods or aesthetic corrections, which often have to be paid for privately. Early cover can protect against large one-off expenses. Also consider the possibility of disability insurance for pupils. This foresight pays off later.
Planning for the long term: building wealth and planning for education
There are various strategies for long-term wealth accumulation and education provision. ETF savings plans offer a flexible, high-return way to build up assets for a child, even with small monthly amounts from just 25 euros. Over a period of 18 years, considerable sums can accumulate in this way. It is important to open the investment account in the child’s name wherever possible in order to make optimal use of tax allowances such as the saver’s allowance of 1,000 euros and the personal tax allowance. In addition to ETFs, traditional bank savings plans or fixed-term deposit accounts can also serve as a supplementary option, depending on your willingness to take risks. An education insurance policy in the form of a unit-linked pension insurance policy can also be an option, often with the added benefit that, in the event of the provider’s death, the savings contributions continue to be paid. State support such as BAföG can later help finance education, whereby the childcare supplement for students with a child can amount to 160 euros per month. A solid financial foundation makes the transition into working life much easier. But which legal aspects need to be considered when saving and insuring for children?
Leveraging expert knowledge: legal pitfalls and optimisation potential
When it comes to insurance and saving for children, there are a few legal details to bear in mind. The lack of legal capacity to commit a tort of children under the age of seven (§ 828 BGB) means that they are not liable for any damage they cause. A good family liability insurance policy should therefore explicitly cover damage caused by children lacking legal capacity. With savings plans in the child’s name, the money legally belongs to the child. Parents may only use it for the child’s benefit. Gifts to children are subject to allowances; per parent, up to €400,000 can be transferred tax-free to a child every ten years. For grandparents, this allowance is €200,000. Our expert tip: check existing contracts to see whether a premium increase clause has been agreed, in order to counteract losses due to inflation. Many insurers offer an option with children’s disability insurance to later switch to income protection insurance without a renewed health assessment – a valuable advantage. A careful review of the policy terms and conditions is essential. With this knowledge, you can now develop your own individual strategy.
Developing a strategy: individual needs assessment and finding suitable solutions
The choice of the right insurance policies and savings products depends greatly on your individual circumstances and your financial goals. There is no blanket recommendation. Start with an assessment: Which risks are most prevalent in your family? What financial means are available each month? How high is your willingness to take risks with investments? The following steps will help you make the decision:
First cover existential risks (personal liability, if applicable, parents' term life insurance).
Check health provision (accident, dental, if applicable, disability insurance for pupils).
Start building long-term wealth (e.g. an ETF savings plan with 25 euros per month).
Review and adjust the chosen strategy regularly (every two to three years).
Do not underestimate the value of independent advice in creating a tailored concept. Careful planning today lays the foundation for your child's financial freedom tomorrow. This way, you can look to the future with confidence.
Shaping the future: the path to securing your child’s future
Financial provision for children is a marathon, not a sprint. It begins with securing basic risks such as liability damage, for which children under seven are not personally liable. This is followed by considerations around accident and supplementary health insurance, whereby a children’s accident insurance policy can cover disability benefits, which are often recommended from a sum insured of EUR 100,000. At the same time, starting a savings plan early, for example with EUR 50 a month into an ETF, is an important building block for education provision. Bear in mind that needs change: a policy that made sense for a toddler may need to be adjusted for a teenager. Regular reviews, for example every three to five years, are therefore important. The biggest mistake is not to start at all or to keep putting off important decisions. With a well-thought-out strategy and the information presented here, you are well equipped. Take the opportunity to get personalised advice in order to make the best decisions for your child’s future.
Request an individual risk analysis now: have your insurance situation checked free of charge and receive specific suggestions for improvement.
More useful links
Destatis provides information on education finance and funding in Germany.
Destatis provides statistics on households and families in Germany.
The Federal Ministry of Finance provides information on planned tax changes in Germany for 2025.
The Consumer Advice Centre offers advice on sensible saving for children and grandchildren.
The German Pension Insurance provides information on orphan's pension in Germany.
The German Youth Institute (DJI) provides information on the life situations and lifestyles of young people.
The Federal Agency for Civic Education (bpb) explains the concept of social security in Germany.
FAQ
Which insurance covers it if my child breaks something?
If your child causes damage to a third party, private family liability insurance will generally apply. It is important that the policy also covers children who are incapable of negligence (under seven years of age), as they are not legally liable themselves.
Are children automatically covered under their parents’ insurance?
In statutory health insurance, children are usually insured free of charge as part of family insurance. In private personal liability insurance, you should choose a family tariff to include children. Other policies, such as accident insurance, must be taken out separately for the child.
What is the difference between statutory and private accident insurance for children?
Statutory accident insurance primarily provides benefits in the event of accidents at nursery school, at school, or on the direct journey there or back. Private accident insurance also offers worldwide protection around the clock, including during leisure time, and often provides a lump-sum payment in the event of disability.
What is the best way to save for my child’s education?
Long-term ETF savings plans are considered very effective, as they offer good potential returns at comparatively low costs. You can get started from as little as 25 euros a month. Bank savings plans or special education insurance policies are also options you should compare.
Do I need to take out separate dental insurance for my child?
Yes, if you would like benefits that go beyond the standard coverage provided by statutory health insurance (e.g. orthodontics for minor misalignments or higher-quality fillings), separate supplementary dental insurance for your child is necessary.
What happens to the savings when my child turns 18?
If the savings account or investment account is held in the child's name, they gain full control over the assets saved once they reach the age of majority (18 years). Until then, the parents manage the money in a fiduciary capacity.
