Funds as a christening gift – investing in a godchild

The godfather is meant to be an adult friend to the child. Could a godfather be part of a child’s life also financially by saving on behalf of the child? Can the godfather decide for himself where the money saved for the godchild will be invested?

In July 2019, my cousin and I got some good news: we were asked to be my goddaughters! There was no need to think about the answer anymore because we were both excited and grateful for this honor. We get along very well with my brother and his wife, and we will be more than happy to be involved in the little girl’s life.

When a child was born, we found that we also wanted to be involved in the child’s life in an economic sense. Investing in a godchild feels like a good option for us. We do not doubt that a child’s parents would not be able to financially care for or invest in their child, but we hope we can help the family and child by investing small sums in funds on behalf of the child. We also want to be involved in teaching the child about money as he grows up.

As a child grows, talking about investments and financial matters will hopefully develop trust and friendship between the child and us while his or her knowledge and skills accumulate money. Tracking investments could also become our common hobby! This text reviews how placement in a godchild works. These tips apply not only to godparents but also to grandparents, aunts, family members, and other adults who want to be involved in a child’s life also financially!

How to place a godchild?

Investing in a godchild begins with opening an account in the child’s name, either at a stone-legged bank or at a stock and investment broker’s hotel. This requires at least the consent of both parents of the child (eg power of attorney) and the child’s name and personal identity number. In the case of a traditional bank, transfers can be made to the child’s account, while in the case of Nordnet, for example, parents can give the godparents access to the child’s investment portfolio by proxy.

You should be remembered that the child’s parents have custody of the child’s assets until the child reaches the age of 18. The parents of a minor also decide on the forms of investment, ie whether the deposits are made in a traditional low-interest bank savings account, fund, or shares. I would invest the money in a fairly high-risk fund with good return expectations, but ultimately the parents have the decision to decide.

Our purpose is to make monthly investments. We plan to invest approximately 40 euros per month for 18 years, which means a total of 8640 euros – that is, without any increase or decrease in value. When I look back on my 18th birthday, this amount of money in one go would have been the fulfillment of my dreams. If, on the other hand, the investments are made in a fund with an annual expected return of 6-8%, the projected value of the investments after 18 years would be around EUR 15,500-19,200. This is already starting to be quite a nest egg for a young adult! With small monthly investments, you can already go a long way – although, of course, you can also invest less often in godparents, such as on birthdays or as a gift.

When investing in a child, it is worth remembering that current legislation allows one person to donate money to another person up to a maximum of € 4,999 over three years. This € 4,999 can be donated at once or in smaller amounts over time – for a maximum monthly amount, this would mean just over € 138 per month.

By investing small amounts at once, we can also ensure that, for example, on anniversaries, we can make slightly larger deposits without worrying about gift tax.

These four steps will get you started

So my cousin and I have the following homework assignments:

1. Discuss how and where the child is saved. There is a need to discuss with the child’s parents how the child could be saved and how the saved funds could be invested.

2. Agree on the appropriate amount. Some parents will be fine with you having godparents, grandparents, or other relatives or acquaintances donate large sums of money to your child. Others think it is good for a child to learn to work for their own money. It is a good idea to discuss the appropriate donation amount carefully with your parents in advance.

3. Open an account or automate account transfers. After deciding with the parents where the money you have saved for the child will be spent, either open a separate account for the child with a stock and investment broker or make an automatic transfer from your bank account to the child’s bank, savings, or investment account.

4. Teach responsible housekeeping. As your child grows and ages, you can teach him or her responsible housekeeping among other godparents.

All in all, investing in a godchild is interesting, important, and comfortable for us. No one knows what the world will be like 18 years from now, so we hope the savings we invest will come into a need as the girl gets older. Of course, we will not be able to decide where the young person will spend this money, but we hope that an open and constructive debate over the years will provide the fins for the young person’s spending.

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