This is how your baby becomes a millionaire: fund saving made easy!

This is how your baby becomes a millionaire: fund saving made easy!

Fund savings plans are becoming increasingly popular in Switzerland, particularly for early asset accumulation. Today, the idea that even babies can benefit from a solid financial foundation is extremely attractive. This is important not only for parents, but also for banks, which are increasingly offering programs for the youngest investors. The NZZ reports that fund savings plans are considered particularly suitable for building assets from infancy onwards because they are easy to use and low-risk.

Parents should actively support their children in financial matters in order to ensure their long-term prosperity. In the current reality, in which interest rates are at rock bottom, traditional savings books are losing relevance. Instead, there are now accounts for children and fund savings plans on the market that are offered by well-known banks such as cantonal banks, Raiffeisen and UBS.

Building wealth through fund savings plans

Getting started early on with fund savings plans can pay off significantly. Ideally, the monthly payment is just 120 francs over a period of 65 years. With an annual return of 7 percent, assets worth over one million francs could be built up in this way. Initial considerations show that a higher return could also result in higher monthly payments in order to reach the desired amount. Swiss equity funds or the MSCI World, which are active on the stock exchanges, come into play here.

The NZZ points out that the risk of investing entirely in stocks, especially for long-term investors, such as babies, can withstand major changes with the help of fund savings plans. The compound interest effect business model is reinforced by a long investment period. In addition, neobanks such as Findependent or True Wealth often offer cheaper ETF options that reflect passive funds and often show better performance than actively managed funds.

Costs and fees

The costs for fund savings plans vary greatly, depending on the fund selection. In general, actively managed funds are more expensive than ETFs because they include fund manager fees. According to Weltsparen, investors should make sure to choose a portfolio without fees to avoid unnecessary costs. Basic costs include, among other things, custody fees, which vary depending on the provider, as well as transaction fees that arise when buying and selling securities.

The company also needs to be aware of the hidden fees. These are partly recorded in the so-called Total Expense Ratio (TER), which includes fund management, custodian bank fees and the costs of the auditors. The issue surcharge, which can be between 2.00 and 5.00%, is considered separately and can significantly reduce the return. One example is the Swisscanto Portfolio Fund Responsible Focus, whose annual fees are 1.68 percent.

Overall, increasing fund savings plans offered by banks are making it easier for younger generations to access capital. At the same time, investors should be informed about the costs involved in order to be able to make strategically better decisions for their children's financial future.