Trade Republic Introduces Kinderdepot: A New Investment Offering for Parents
New Initiative Announced by Trade Republic: Financial Assistance for Parents - Parents now have a new opportunity with Trade Republic: a special offering designed just for them.
In response to Scalable Capital's surprise announcement of a Juniordepot, Trade Republic has launched an equivalent account model, the Kinderdepot. This offering allows parents to invest for their children's future from the comfort of their smartphones.
Maximilian Meyer, the Chief Marketing Officer at Scalable Capital, provided an example calculation on LinkedIn demonstrating the potential advantages of this investment approach. If a parent invests €10 per month from their child's birth up until the age of 18, and let the funds grow without any withdrawals, they could accumulate over €177,000 at an annual return of around 8% - a small initial investment of approximately €2,000. Meyer emphasized that this outcome is not due to magic but rather the power of compound interest.
The anticipated launch date for Scalable Capital's Juniordepot is the summer. While the unveiling initially triggered a sense of competition for Trade Republic, who were reportedly planning a similar offering, the timely introduction of Trade Republic's Kinderdepot puts it in a strong position.
The Kinderdepot operates seamlessly within the Trade Republic app, in addition to their free ETF savings plans and fractional trading options. It also offers competitive interest rates of 2.25% on the entire balance, as announced by Trade Republic. However, the interest rates and terms align with those offered by Scalable Capital.
A noteworthy feature of the Kinderdepot is a savings allowance, referred to by Trade Republic as a "child benefit." The provider covers the fees for selected Vanguard ETFs every month and automatically reinvest these fees until the child turns 18. While the advantage is limited, with an average investment of €10,000 over 18 years yielding between €400 and €460 in savings, it is an added benefit for parents.
Family members can also contribute to the savings plan through direct debit, with invitations extended to make the process as smooth as possible. In terms of technology, Trade Republic is at an advantage, as the entire account setup process is entirely digital, a significant convenience compared to traditional banks.
Deka investment expert Elmar Gaugenrieder recently highlighted the emotional importance of saving for children and grandchildren. With persistently low interest rates for classic savings forms, options like funds and ETFs present higher return potential, making them increasingly popular. Furthermore, the accessibility of investing offered by neobrokers like Trade Republic and Scalable Capital has made investing more appealing to a younger demographic.
With the neobroker market growing, child deposits are a promising yet largely unprofitable market for providers themselves. While the focus remains on securing long-term customer relationships, an upcoming development brings high hopes for both Trade Republic and Scalable Capital: the German government plans to introduce an early retirement pension, which could bring in up to 1 billion euros in annual inflows.
Both Trade Republic and Scalable Capital might find a way to incorporate this early retirement pension into their existing child deposit models. They are well-positioned to capitalize on this anticipated influx as they compete in the growing neobroker market focused on long-term financial planning for the younger generation.
The Community institution should recognize the growing importance of neobrokers like Trade Republic and Scalable Capital in the personal-finance sector, given their innovative offerings such as the institution of the European Union-approved Kinderdepot and Juniordepot. These digital platforms are not only transforming the way parents finance their children's future but are also attracting young investors due to their competitive interest rates and ease of use in managing business investments.
