Savings accounts are often the first step in building wealth for a child. In Luxembourg, most banks offer plans specifically designed for minors.
These accounts sometimes present interest rates slightly higher than those of standard savings accounts, sometimes with preferential pricing conditions and even welcome bonuses. For example, some Luxembourg banks offer a birth bonus of up to 50 to 100 euros for opening a savings account in the name of a newborn.
Parents can make regular or one-off contributions, such as Christmas gifts or birthday gifts from relatives.
Some accounts are blocked until the child is 18, others offer a withdrawal card from the age of 12 or 15.
A savings account in the parent's name
You can decide to open an account in your name, into which you will periodically or punctually deposit sums of money. The advantage of the account in your name is that the sums deposited there remain your property, you can dispose of them freely and your child cannot access them. You will transfer this sum to him when you deem it useful.
Term deposits
For those who can afford to tie up a sum of money for a set period of time, term deposits generally offer more attractive returns than traditional savings accounts.
The principle is simple: you block capital for a fixed period (generally from 1 to 10 years) in exchange for a guaranteed interest rate that is set from the start. The longer the period of immobilisation, the more advantageous the rate. This predictability allows you to know exactly how much money the child will have at maturity.
It is important to note that these products involve a certain rigidity: early withdrawals are either impossible or penalised by a significant reduction in yield. This constraint can nevertheless prove to be an advantage in a truly long-term savings perspective, by avoiding any temptation to draw on this capital before time.
Life insurance is one of the most flexible and tax-efficient savings vehicles in Luxembourg, particularly suitable for long-term savings for your minor child. Parents can take out a contract for the benefit of their child.
These contracts may include a guarantee in the event of death or disability.
Taxation on children's savings plans
The premiums paid into these contracts are deductible when filing your tax return. It is possible to deduct as of €672 per year depending on your marital status. The contract must remain in force for at least 10 years to benefit from these tax deductions.
Classic life insurance contracts
Why is it a good idea to take out a life insurance policy for your minor child?
- The diversification of investment vehicles offers potential returns suited to long-term savings objectives.
- The capital always remains accessible to meet the child's unforeseen needs.
- The parents retain full control over the use of the savings until the child is of age.
- In the event of death, the child is the beneficiary of the sums saved.
Investing in securities represents an interesting option for long-term savings for children, particularly in a context of low rates such as we have been experiencing for several years.
This solution has the potential advantage of a higher return than traditional banking products in the long term, although it also involves a higher level of risk. However, the long investment horizon (often 10 to 20 years for children's savings) helps to smooth out fluctuations in the financial markets.
An often-recommended strategy is to favour significant exposure to equities for the first few years (when the investment horizon is distant), then to gradually secure the capital as the maturity approaches.
To succeed in your savings strategy for your children in Luxembourg, keep these essential principles in mind:
- Start early: Even small amounts saved regularly can generate significant capital through the compounding of interest.
- Adapt the investment vehicles to the child's age and the savings horizon
- Take full advantage of the advantageous tax framework in Luxembourg
- Do not hesitate to combine different solutions to create different sources of savings
- Gradually involve the child in managing their savings as they grow
Starting from birth means you can save small amounts over the longer term. Choose the solution best suited to your plans. Saving up for a child is not only an act of financial anticipation, but also a privileged opportunity to transmit values of foresight and financial responsibility that will be precious to them throughout their life.
The best savings account for children in Luxembourg is usually the one that offers the highest interest rate without management fees. You can inquire with different banks about the financial conditions of their savings accounts.
It all depends on your goal, but monthly savings starting at €50 are a solid foundation. This sum, invested from birth with an average return of 3%, allows you to accumulate at least €15,000 by the time the child reaches the age of majority. To finance a full higher education, it is recommended to find out about the estimated cost of higher education.
Yes, as a parent or legal guardian in Luxembourg, you can withdraw money from your child's account while they are a minor, but only for expenses that serve their direct interest. Luxembourg banks generally require a sworn statement or supporting documents for large withdrawals. For substantial sums or investments, the authorisation of the guardianship judge may be required in accordance with Luxembourg civil law. It is advisable to keep supporting documents for expenses paid with this money in case of a later audit. Please note that some children's savings accounts do not allow withdrawals.
In Luxembourg, only legal representatives (parents or guardians) can open a bank account for a minor. Grandparents or other family members cannot open an account directly but can make payments into an account opened by the parents.
Choosing the optimal savings solution for a child largely depends on the investment horizon and the objective:
- For short-term savings (less than 5 years), savings accounts and short-term deposits offer security and availability.
- For the medium term (5 to 10 years), term deposit accounts and certain life insurance contracts provide a good balance between return and security.
- For the long term (more than 10 years), investment in diversified securities and unit-linked life insurance offer the best return prospects.