10 euros a month to reach 53,000? Germany's plan for retirement starting from childhood

The German Parliament approved an initiative this Friday for the government to contribute money to children's pension accounts, investing funds long-term in the markets to create a retirement pension supplement starting from childhood.

With the "Frühstartrente" (early start retirement savings) program, the state will contribute 10 euros per month (about 11 dollars) for every child between the ages of 6 and 18 into an individual account invested in the financial markets. Parents and grandparents will be able to supplement these contributions.

If an individual account is not available, the money will be invested collectively under the management of the German Federal Bank.

"By starting so early, a considerable sum can be accumulated over the decades," explained Finance Minister and Social Democrat Lars Klingbeil in a statement.

According to the minister, state contributions alone could raise the account balance to about 53,000 euros (approx. 1,100,502.60 pesos) when the beneficiary turns 65. The figure could reach 160,000 euros (approx. 3,322,657.60 pesos) if parents or grandparents contribute an additional 20 euros per month.

However, the state will only contribute a nominal total of 1,440 euros per child over 12 years.

The 53,000-euro projection assumes an average annual return of 7%, with accumulated interest. In this way, the state contribution would reach about 2,200 euros by the time the beneficiary turns 18 and would continue to generate returns until the age of 65, without the need for further contributions.

The result will depend on the performance of the markets over several decades.

If an average inflation rate of 2% is considered, the 53,000 euros would be equivalent to about 20,000 euros in current purchasing power.

The reform comes in a context where demographic aging is exerting increasing pressure on the German pension system, which is financed by the contributions of active workers.

In this way, Berlin seeks to encourage private savings to supplement public pensions.

The cost of this new aid for the state is estimated at 198 million euros in 2027 and is expected to reach 411 million in 2030.

The left-wing opposition parties, The Greens and Die Linke, voted against the program, considering it socially unequal since wealthier families will be able to contribute more money to their children's accounts. The far-right party AfD abstained.

The measure will begin to apply to children born in 2020, with retroactive effect to January 1, 2026.