Frühstart-Rente: 10 euros a month from the state for children

Starting early buys you time. That is the whole point of the Frühstart-Rente. From a child's sixth birthday, the state pays 10 euros a month into a retirement contract. The money is invested in funds and is meant to grow until retirement. The government has two goals: a small head start for retirement savings, and early hands-on experience with investing for children and parents.

Children qualify once they turn 6, until they turn 18, if their main residence is registered in Germany. They need a German tax ID. It starts with children born in 2020, who turn six in 2026. Each year the next birth year joins. Older children can have a contract, but without state money. Payments stop in the month before the 18th birthday, or earlier if the child no longer lives in Germany.

If parents open a standard depot (Standarddepot) for their child, the 10 euros go straight into it. This is a certified retirement account with two funds and effective costs capped at 1.0 %. Until the 18th birthday no acquisition or sales costs may be charged. If parents do nothing, the state invests the money collectively. A special federal fund is set up in 2028 and the Bundesbank invests it globally diversified. The child can later claim their share, including gains, into their own contract by their 35th birthday at the latest. After that the claim lapses.

Parents, grandparents or the child can pay in extra, up to 6,840 euros a year. These top-ups get no state subsidy and parents cannot deduct them from tax. According to the bill's explanatory notes, own top-ups and their gains can be withdrawn under the contract terms. The state's 10 euros and their gains, however, stay locked until retirement. They cannot be sold, pledged or seized by creditors.

State payments end at the 18th birthday, but the money stays invested. From then on the whole Frühstart balance can be moved to another certified retirement contract, for example the young adult's own Altersvorsorgedepot. There they can keep saving and receive the regular subsidy if they are eligible. The money is generally available only from 65. One exception is a home they live in, under the rules for subsidised retirement savings.

Headlines mention sums around 53,000 euros. That is not a promise, it is a calculation built on assumptions. We checked: 10 euros a month from age 6 to 18, then left untouched until 65. You only reach about 53,000 euros with 7 % return a year after costs, every year, for 59 years. At 5 % it is about 19,000 euros, at 3 % about 7,000 euros. These are also euros from around 2085. With 2 % inflation, 53,000 euros would buy only about what 16,500 euros buy today. And payouts are taxed.

The state's 10 euros do not count as income. Gains inside the contract are tax-free until payouts begin. In retirement the payouts are then taxed at the personal income tax rate under § 22 No. 5 EStG. This is the same logic as the Altersvorsorgedepot for adults.