Optimal protection and savings strategies: How to secure your child's financial future
27 Mar 2025
8
Minutes
Katrin Straub
CEO at nextsure
Financial planning for children is a matter close to the hearts of many parents. But which insurances are truly necessary and how can one effectively save for the future? This article presents you with practical ways.
The topic in brief and concise terms
An early and well-thought-out combination of essential insurance (liability, health, life insurance for parents) and long-term saving strategies (e.g., ETF savings plans starting at 25 euros per month) lays the foundation for your child's financial security.
Specific supplementary insurances such as children's accident, dental supplementary or early occupational disability insurance can fill important gaps and protect against high costs; assess the necessity individually.
Take advantage of tax benefits by holding savings accounts in the child's name and fully utilising allowances (such as the saver’s allowance of 1,000 euros and the basic tax-free allowance); regularly reviewing and adjusting your strategy is essential.
Laying the foundation: Essential insurance for the offspring
Basic coverage for children begins with a few but crucial policies. A private liability insurance is fundamental, as children under the age of seven are considered legally incapable of wrongdoing. For damages they cause, the parents are often liable if supervision duties were neglected. Many family policies cover legally incapable children up to an amount of, for example, 50,000 euros. Health insurance is mandatory in Germany; children are usually co-insured free of charge under the statutory family insurance of the parents. A term life insurance for the parents secures the financial future of the children if a provider passes away, and should cover at least three to five gross annual salaries. These basic insurances create an initial safety net. The next step is to consider specific risks and precautionary options.
Health in Focus: From Accident Protection to Dental Care Benefits
In addition to basic insurance coverage, specific health insurances are worth considering. A private accident insurance for children provides benefits in the event of disability due to an accident, which is particularly important since statutory accident insurance usually only covers accidents at kindergarten, school, and on direct routes. Experts recommend insurance sums of at least 100,000 euros for fifty percent disability. A supplementary dental insurance for children can be worthwhile, as orthodontic treatments can quickly cost several thousand euros. Statutory health insurance often covers costs only for severe misalignments (KIG grades three to five) and even then only for standard services. Many families underestimate the additional costs for modern treatment methods or aesthetic corrections, which often have to be privately funded. Early coverage can protect against high one-time expenses. Also consider the possibility of occupational disability insurance for students. This foresight pays off later.
Long-term planning: Designing wealth building and education planning
For long-term asset building and educational provision, there are various strategies available. ETF savings plans offer a flexible and high-return way to build wealth for the child with monthly contributions starting from as little as 25 euros. Over a period of 18 years, considerable sums can accumulate. It is important to open the account preferably in the child's name to optimally utilize tax allowances like the savings allowance of 1,000 euros and the basic allowance. In addition to ETFs, traditional bank savings plans or fixed-term deposit accounts can also serve as supplements, depending on risk appetite. An educational insurance in the form of a unit-linked pension insurance can also be an option, often with the additional benefit that in the event of the provider's death, the saving rates continue to be paid. Government subsidies such as BAföG can later help finance the education, while the childcare allowance for students with children can amount to 160 euros per month. A solid financial foundation significantly eases the start into professional life. But what legal aspects need to be considered when saving and insuring for children?
Leverage Expert Knowledge: Legal Pitfalls and Optimization Opportunities
When it comes to insurance and saving for children, there are some legal details to consider. The incapacity for children under seven years (§ 828 BGB) means they are not liable for any damages they cause. A good family liability insurance should therefore explicitly cover damages caused by incapacitated children. In the case of savings accounts in the child's name, the money legally belongs to the child. Parents may only use it for the benefit of the child. Gifts to children have tax-free allowances; per parent, up to 400,000 euros can be transferred to a child tax-free every ten years. For grandparents, this allowance is 200,000 euros. Our expert tip: Check existing contracts to see if a contribution dynamic has been agreed upon to counteract inflationary loss. Many insurers offer an option with children's disability insurance to later convert to an occupational disability insurance without a renewed health check - a valuable advantage. A thorough review of the contract conditions is essential. With this knowledge, you can now develop your own individual strategy.
Developing a Strategy: Conducting an Individual Needs Analysis and Finding Suitable Solutions
Choosing the right insurance and savings options strongly depends on your individual life situation and financial goals. There is no blanket recommendation. Start with an assessment: Which risks are most prevalent in your family? What financial resources are available monthly? How high is your risk tolerance with investments? The following steps can assist in decision-making:
Secure existential risks first (liability insurance, if applicable, term life insurance for parents).
Check health coverage (accident, dental, if applicable, disability insurance for pupils).
Begin building long-term wealth (e.g., ETF savings plan with 25 euros monthly).
Regularly review and adjust the chosen strategy (every two to three years).
Do not underestimate the value of independent advice to create 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 peace of mind.
Shaping the Future: The Path to Optimal Protection for Your Child
Financial planning for children is a marathon, not a sprint. It begins with securing fundamental risks such as liability damages, for which children under seven years are not personally liable. This is followed by considerations of personal accident and supplementary health insurance, with a children's accident insurance policy potentially covering disability benefits, often recommended for a sum insured of 100,000 euros or more. At the same time, an early start on a savings plan, such as saving 50 euros monthly into an ETF, is an important component of education provisions. Remember, needs change: a policy suitable for a toddler might need adjustment for a teenager. Regular reviews, every three to five years, are therefore essential. The biggest mistake is not starting at all or postponing important decisions. With a well-thought-out strategy and the information presented here, you are well-prepared. Take advantage of individual advice 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 optimisation suggestions.
More useful links
Destatis provides information on educational finances and funding in Germany.
Destatis offers statistics on households and families in Germany.
The Federal Ministry of Finance provides information on planned tax changes in Germany for the year 2025.
The Consumer Advice Centre gives advice on sensible saving for children and grandchildren.
The German Pension Insurance offers information on orphan's pensions in Germany.
The German Youth Institute (DJI) provides information on the living conditions and lifestyles of young people.
The Federal Agency for Civic Education (bpb) explains the concept of social security in Germany.
FAQ
Which insurance pays if my child breaks something?
If your child causes damage to a third party, the private family liability insurance typically comes into play. It's important that the policy also covers children who are considered incapable of committing an offense (under seven years old), as they are not legally liable themselves.
Are children automatically covered under their parents' insurance?
In statutory health insurance, children are usually co-insured free of charge as part of family insurance. For private liability insurance, you should choose a family tariff to include children. Other insurances, like accident insurance, need to be taken out separately for the child.
What is the difference between statutory and private accident insurance for children?
Statutory accident insurance primarily covers accidents occurring in the nursery, school, or on the direct way there and back. A private accident insurance, on the other hand, offers worldwide protection around the clock, even during leisure time, and often provides a lump sum payment in case of disability.
How can I best save for my child's education?
Long-term ETF savings plans are considered very effective as they offer good return opportunities at relatively low costs. You can start with as little as 25 euros per month. Bank savings plans or special education insurance policies are also options you should compare.
Do I need to take out a separate dental insurance policy for my child?
Yes, if you want services that go beyond the standard coverage of the statutory health insurance (e.g., for orthodontics for minor misalignments or higher quality fillings), a separate dental supplementary insurance for your child is necessary.
What happens to the savings when my child turns 18?
If the savings account or securities account is in the child's name, they will have full control over the accumulated assets upon reaching the age of majority (18 years). Until then, the parents manage the funds in a fiduciary capacity.
