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Saving goal
Saving for children
Saving for children is one of the finest gifts you can give. Regular savings can become the foundation for a driving licence, studies or a first home. The earlier you start, the longer the money has to grow through compounding.
Benefits of long-term saving for children
Smart to start early
Saving for children is different from other types of investing because the time horizon is long and the goal is often very clear. With a well-thought-out strategy, regular contributions and an appropriate risk level, you can build capital that gives your child more options later in life. Whether the goal is education, housing or a financial head start in adulthood.
- Long time horizon
- Savings for children often span 10 to 20 years, ideal for equity funds.
- Compound effect
- Small amounts over long periods can grow significantly thanks to compounding.
- A gift that grows
- Your savings can give your child financial stability early in adult life.
Guide
How to build a savings plan for children that grows
Saving for children is not about finding the perfect moment or picking the best fund every year. The most important thing is to start and give the money time.
- Start early and save regularly
- Time is the most important factor in children's savings. A plan that starts at birth has 18 years to grow. With a long time horizon and the compounding effect, regular contributions can grow into a significant amount. Even starting when the child is 5 or 10 still provides a long horizon compared to most other forms of saving.
- Choose the right account
- Most people choose an investment savings account (ISK) in the child's name. Taxation is straightforward, a low flat-rate yield based on the account value, and there are no fees for deposits or withdrawals. The child becomes the account holder at age 18, which means the money cannot be withdrawn by the parent once deposited. If you want to retain control for longer, an endowment insurance in your own name may be an alternative.
- The whole family can contribute
- Saving for a child does not have to be a solo effort. Grandparents can deposit money directly into the child's ISK or give money to the parent who then deposits it. Gifts to children under 18 do not require a gift declaration in Sweden. By involving more people in the savings plan, the amount can grow faster without putting pressure on a single household budget.
- Consider the bigger picture
- Children's savings are part of the family's overall finances. Before increasing the monthly amount, it may be wise to ensure you have your own buffer and that your retirement savings are on track. Saving in equity funds means the value can fluctuate in the short term, but with the long time horizon, equity funds have historically rarely delivered negative real returns over 10 years or more.
Account types
Three account types for saving for children
The choice of account determines who controls the money and how it is taxed. Here are the three most common options.
01
ISK in the child's name
The most common choice. Simple flat-rate taxation and no withdrawal fees. The child becomes account holder at age 18, meaning the money cannot be withdrawn by the parent once deposited.
02
Endowment insurance in your name
Similar taxation to ISK but you retain control. You decide when the money is transferred to the child. Can also simplify estate planning by naming beneficiaries.
03
ISK in your own name
Full flexibility. You can use the money for your child whenever you want, but the account is not earmarked. Suits those who want to keep all options open.
Common questions about saving for children
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