Why invest your child’s savings in funds?

When you save for a child, the period is often quite long, maybe even decades. You should get the most out of the long period and protect the savings from inflation. “If you keep the savings in a regular account for years, inflation will erode their value. That’s why you should invest them in funds, for example,” says Tanja Eronen, who heads the service development in Nordea’s Personal Banking.

“Since the future state of the Earth matters to children in particular, many parents favour our sustainable Stars funds.  Other popular alternatives include our Enhanced funds due to their low costs. Both of these product families include a global fund, which offers easy and excellent diversification,” says Tanja Eronen.

Direct fund investments or a unit-linked insurance policy?

You can invest in funds either directly or through unit-linked insurance, which is also known as an insurance wrapper. Any returns gained through fund investments are your child’s capital income, which is subject to tax.

A fund may have unit series with different return distribution qualities, and you can select whether you want to buy distribution or growth units for your child. Growth units are ideal for long-term investments, as any returns or taxes won’t materialise until your child’s fund units are sold. This means that the returns gained over the years will also gain returns and accrue the capital. With distribution units, returns and taxes are paid annually.

If you invest through a unit-linked insurance policy, you will benefit from being able to choose several funds within the policy and switch them without immediate tax consequences. This makes it easy to adjust the investments as your child grows and there are changes in the market. Any fund switches made within the unit-linked insurance policy don’t need to be reported in the child’s tax return, and your child will only need to pay taxes after they withdraw all or part of their savings.

A unit-linked insurance policy may also be handy if there are others saving for the child besides the parents, such as godparents or grandparents.

Regular fund saving under a monthly agreement – get started with as little as 10 euros a month

If you save even a small amount for your child every month and invest it in a fund, the savings can grow almost unnoticed over the years: time is on the fund investor’s side. Time levels off market fluctuations and, over time, investments start to compound. 

When you conclude an agreement on monthly saving with us, we will automatically transfer the agreed amount to the selected fund or unit-linked insurance for your child. You won’t need a large amount of money to get started with fund investments – as little as 10 euros a month will do just nicely. Over the years, even small sums will accrue a handsome nest egg for your child if managed well.

You can adjust the monthly amount anytime in Nordea Mobile or Netbank. You can also invest larger lump sums or take a pause.

Can I as the guardian use my child’s savings?

Once money is donated to a child, it is their property and the child’s parent can’t use them for personal expenses: so if you are saving in an account or fund in your child’s name, you can’t spend these savings on the family’s other expenses.

Book a meeting for investment advice and start saving for your child 

We can meet either online or in-branch, and the meeting will take about an hour. Our expert will help you choose the best option for saving for your child and for investing the savings.

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Want to learn more about investing in Funds?

Check the video to see how our specialist Tomas Parkama explains the basics of saving and investing in funds. The video is unfortunately in Finnish only.

What is a fund?

A fund is a portfolio of investments containing various financial instruments, such as equities. A fund is managed by a portfolio manager in a fund management company. When you invest in a fund, you buy shares in a selected investment portfolio. These shares are also called fund units. The value of a fund unit is calculated daily, and any increases or decreases in the value will depend on the returns produced by the fund’s underlying investments.

What are the differences between fund types?

Different funds contain different securities based on whether their objective is to seek higher returns at a higher risk or lower returns at a lower risk. Some funds may also focus on a certain theme, such as sustainability.

How do I choose the right fund?

When you’re choosing your funds, think about how much and for how long you want to invest and how much risk you are willing to take. Risk and return go hand in hand: the higher the return you seek, the more fluctuations you will need to tolerate. Our investment advice will help you in choosing the funds that are the best for you.

What is unit-linked insurance?

Through unit-linked insurance, you can invest in a wide range of funds and investment baskets and switch between investments under one insurance contract. You will only need to pay taxes on any capital gains when you withdraw all or part of your savings from the unit-linked insurance: switching between investments is not subject to tax.

Have you already tested our digital investment adviser Nora?

Nora can recommend you some easy and popular fund options. You can safely test Nora more than once without committing yourself to anything. Nora can help you get started with funds if you want to save for yourself, but for the time being Nora can’t set up fund saving for children.

We recommend you also book a meeting with one of our experts: at the meeting you can look at the different options together and choose the ones that suit you and your child the best. The meeting won’t cost or commit you to anything.

Important information about investing

The information provided on this website is intended as general product information only and does not constitute investment advice or recommendations. When it comes to funds or equities, past performance is not a guarantee of future results. The value of fund units or equities may increase or decrease due to market movements, and it is not certain that you will get back the entire amount you invested.