How to invest for children?

Children
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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)

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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

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@Butch a good recent example to what might happen: Problems with a "Custodial Savings Account" for a child

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