How old was he at that time?
That is really interesting.
The results seem a little strange to me even after knowing the power of compounding.
Some points to consider that could potentially change the graph (not sure how much):
- 8% seems high. Global market premium was ~5% on average in the past. Perhaps even lower for the future.
- The 5K paid at e.g 60 years old, worth far less compared to the same amount at 30 due to inflation
- Investing in education (or happiness
) at 25 may have higher ROI vs stock market.
Still, time + compounding make wonders!
UPDATE: AI to the rescue:
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He was 11 or 12
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Well, I mean the numbers check out fairly well, considering that 5000/year is 416.66/month. Plus it’s US-based, so maybe 8% is reasonable?
The graphic is not nuanced around inflation adjustment or future value of money, so not sure what’s unfair about it?
For me inflation is less important in this timeframe, what’s more important is how much work does this 5K do with a 5-year runway left before pension, compared with what it can do when it has 35 years of work in front of it - that’s the future value of money.
And of course what % of the total it represents. My own testing showed me that one needs 10 years of steady investing before compounding starts doing more work for you than you for it, and that by year 20 one can basically stop saving at all and compounding will do everything.
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We agree on the power of compounding and that more time helps a lot!
If I remember well US returns were historically ~2% above the global market return. I wouldn’t count on that for the future.
My issue with the initial graph is that it does not compare apples to apples → the result of the question of “Who will earn more” is not correct.
Well… I think it it should be taken into consideration if you want to compare. Your 5K contribution when you are 25 is not the same as the 5K at 65. You cannot compare the results by ignoring the difference
That is indeed interesting. Though not so clear from the specific graph.
Yes, “earns” is the wrong word indeed! Edit: It’d be even stupider if it too the pure finance lingo and said “investor B lost money” 
I fully agree, and personally take this as a learning from the graphic, it’s all about the length of the runway, for the two reasons I mentioned above: length it can work for you (ie compound), and % of the total guiding if it’s a meaningful addition to the pot or not. 5K on a 10K portfolio is yuge, 5K on a 500K portfolio is borderline a daily market blip.
Maybe perception? To me this is a very clear message: “invest for 10 years and let it run for 30 and you’ll have more than someone investing for 30”, and is consistent with the rest.
I think we’re 100% in agreement, though
I don’t have any first hand experience, but assuming you mean that the PF account will be in child’s name (because that was your plan in an earlier post): I think that Postfinance may not (or even maybe “should not”) allow such withdrawals. The account is in the child’s name, once you send money to that account you effectively gift it to the child, the money becomes their - you are simply the administrator of child’s assets. At this point it is bank’s responsibility to ensure that child’s assets are not stolen/squandered by the administrator (i.e. you), i.e. they may be spent only in the best interest of the child, and if disagreements arise the child protection / courts might need to be involved. The fact that you are trying to withdraw the money and move them back under your name seems clearly against this: you are basically taking control over the money and promising to give the money back at some point, but it’s just your word, no guarantees.
I don’t get the need for the account in child’s name: you mention it is to teach basic accounting but also that the child is yet to be born: isn’t it a problem to be tackled many years from now?
Maybe perception . For me the statement in quotes is not correct (as shown in the second graph)
Well, 99% . It would have been boring if it was 100%.
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I don’t want gifts to my child to be flowing through my retail bank account (or my wifes) as then I need to make an effort to transfer it out to not lose sight of it. Easier to e.g. tell grandparents to transfer any gifts to postfinance.
I expect that until the kid is 18, I can effectively control what happens with the postfinance account - although I’d imagine handing the account over to the child (access codes, etc.) much earlier.
As per Fedlex , “the parents have the right and the duty to administer the child’s property” but you administer it by representing the interests of the child, gifting the money to you (which is what a transfer from child’s account to yours account would effectively be) would clearly be not in their best interest.
The whole point of an account in minor’s name is to legally protect the assets from being abused by the parent: if the parents would have full unrestricted right to do what they want then there would be no reason for the account to exist in the first place, you might as well always have assets in parent’s name (since they would be free to transfer all money to themselves the day before the child turns 18).
Take the example of the grandparents gifting the money to the child’s account: the law must interpret it as the fact that they explicitly want the money to go to the child and not you (there might have been other reasons underneath, but impossible to know for a fact): so that is the whole point of the account in minor’s name, for people to gift money to the child to be confident that the money will be preserved until they are 18 or spent only when necessary.
Again, this is all my understanding in theory and I don’t have practical experience. But you should probably study this in detail before you make any transfers to the child’s account, because it might be a one way street
If you want a separate account for easier accounting, you can consider:
- having a separate bank account in your name that you treat only as theirs
- just using the cash balance of your broker account (the one you will open in your name but that you will consider to belong to the child) and no bank account, since you don’t need it anyway for now. You and your wife would send money there every month, but the grandparents would indeed need to send the money to your bank account first and then you need to send them to the broker account
Even further, Art 320 ( Fedlex ) says:
1 Settlements, compensation and similar payments may be used in portions to fund the child’s maintenance in accordance with its current requirements.
2 Where necessary to meet the costs of maintenance, upbringing or education, the child protection authority may permit the parents to make use of other parts of the child’s assets in specific amounts.
So this reads as implying that the minor’s money may not be spent in general (with exceptions of dividends and interests) unless permitted by the child protection services. So I think you are expected to preserve and grow (i.e. invest) the assets without consuming them, unless exceptional circumstances (I believe cases when you don’t have enough money yourself to provide food/shelter/education to the child, etc.)
Isn’t a large part of this thread about stories related to that? (parents/guardian vs. access to account in child’s name)
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Representing the interests of the child is EXACTLY what I’d be doing by setting money aside for him!
While I appreciate your effort towards a detailed response, I think you’re overcomplicating things.
Next thing I know, I’d have to ensure payment of AHV if I pay my child a few CHF to shovel snow in front of our house in 15 years…
I am talking about transferring the money from the child’s account to one held in your own name, which is bank → broker step in the plan you shared, that may not be done because that is formally the child donating money to you. Once the cash is in the bank account in child’s name it will need to go to a broker account also in child’s name.
If you mean that in your specific case you are an ethical individual that will give the invested and grown money back to your child at a later date, it would be similar to saying “I have wasting time at the airport in security checks, they shouldn’t do it for people that are not carrying bombs”: obviously the same rules need to apply to everyone because we don’t know which parents are gonna steal the money and which are not going to.
Anyhow, as @nabalzbhf mentioned this is basically the whole point of the thread and it has been discussed above extensively, I also cited and linked the relevant laws, and in general just typing “in switzerland if the money is in an account in minor child’s name, can the parent just transfer them to their own account?” will immediately give you the same responses in google. You are obviously free to proceed with your plan if you wish anyway
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The portfolio in Finpension is clearly separated from my own assets and is clearly preserved for the child. There is no issue.
This is not “skipping airport security because I promise I’m safe.” It is more like checking a child’s suitcase under the parent’s booking reference. The airline may see the parent managing the process, but the contents are still the child’s, labelled as such, and being transported for the child’s benefit. The control is administrative; the beneficial ownership has not changed.
I’m not trying to sneak something past anyone, or claim that rules shouldn’t apply to me because I’m “one of the good guys”.
A better analogy would be: the child’s suitcase is sitting at the curb, and I’m putting it in the hold so it actually gets to the destination. The fact that I’m the one handling the suitcase doesn’t make the contents mine.
A child can’t choose a broker, asset allocation, fee structure, custody setup, tax treatment, etc. That’s exactly why parents administer children’s assets. The real question should be whether I can show that I’m acting as a steward: separate portfolio, clear records, no personal use, no mixing with my own spending money, and the child remains the economic beneficiary.
If that is the case, then I find it hard to see the moral or legal problem. Treating a documented investment for the child as if it were theft, while treating inflation-eroded cash as the safe option, feels like exactly the kind of bureaucratic thinking that protects forms rather than children.
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What people have been trying to point at, is that part of the experiences shared in this thread where about the fact that if there’s money in a child name, it can’t be transferred back to an account in the parents name.
So unless the finpension account is legally in the child name, banks will usually prevent the transfer.
When you are administering child assets you can and must chose the broker, asset allocation, fee structure, custody setup, tax treatment: but all of this must be done in the account that is held in the child’s name.
Think about it: if a parent is allowed to withdraw child’s funds in an account of parent’s name then the assets are always one click away of being spent, this clearly can not work because the government loses almost all ability to protect the child’s assets this way. It would be unscalable to have an approach where someone from child protection services comes to you, you show them your separate portfolio that you hold in your name, explain your strategy and then they go like “ok, this seems a trustworthy guy” and approve it, and then they move to the next parent.
Even if you remove the parent’s fraud and ill intent from the question, it is still clearly a bad idea to allow parents to withdraw funds in their name. For example, imagine you move the funds to your account and then get sued, you lose and ordered to pay all your money to someone else: now all the child’s money is gone, but it was supposed to be their money, not yours.
The accounting on paper obviously can’t scale when things are official and legal, so the rule is simple: child assets stay in child’s name. On top of these banks know that the child’s assets are not supposed to be spent so they will act accordingly.
I find this approach reasonable and moral but reasonable people can disagree here, I understand. I didn’t intend to discuss our opinions of this approach, I am just trying to warn you about (what I think the very) likely outcome of your actions will be: you move the money to the postfinance account in child’s name, then you try to move that money into a broker account in your name and postfinance tells you “absolutely no way, unless you bring be authorization to do it from child protection services”. And your only option will then be to open a broker account in child’s name that you can fill from their bank account (and this will be limiting in terms of which brokers accept minors)
Another way to think about: transferring assets to an account held in another person name without it being payment for goods and services and without any accompanying loan being stipulated, is a gift.
You plan (your bank account → child bank account → your broker account) is, legally speaking, you gifting money to your child and then your child gifting money back to you.
You are an adult and you are free to make gifts to anyone, including your child. But as child’s asset administrator you are absolutely not allowed to make any gifts from the child: gifts are, from purely individual financial aspect, an wrong decision, it’s more of a moral move. Your duty as administrator is to keep and grow their assets, since your child can’t express opinions yet about what their morals tell them to do in terms of gifts, you may not make them.
This is why I say that sending money to the child’s account is a one-way street (until they turn 18). And again, I am not saying “you may not” as in “you should avoid doing it”. I’m saying that the bank and child protection services will literally prevent you from doing it - it’s their job
@Butch a good recent example to what might happen: Problems with a "Custodial Savings Account" for a child
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I just created the finpension investment account in my own name and transfers happen direct from my account thus circumventing the childs Post Finance account. Smaller donations can still go there and we’ll probably just keep there as a cash account. Problem solved, no risk.
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