How to get started with investing in Denmark

I know how overwhelming it can be to live in a new country where you may or may not want to build a future, not speak the language, and feel like you can’t quite grasp how to best manage your money. Denmark is not a cheap country to live in, that’s for sure. 

My name is Andreea, and I love everything—personal finance. I spent many hours in the past few years learning about money, how to invest in Denmark, what it costs, how to budget, how to save up, and so much more. In 2020, I bought a house with my husband while we were both studying, and I started investing. But before that, I spent so much time figuring things out, finding the best solutions for my lifestyle, and because of a lack of Danish financial vocabulary, it took way more time than it could or should have. 

So now I want to share some of the knowledge that I’ve been gathering with you. Earlier this year, I started an Instagram account and a blog – moneylikealocal.dk – where I share financial knowledge. And in this article, I will walk you through some savings accounts and investment options that you should know about. So you can make informed financial decisions. But before we begin:

DISCLAIMER: I am not a financial advisor. I am not giving you advice on what you should invest in, but rather sharing knowledge. Whatever stocks, funds, and so on, I may mention in this article should be taken as examples, not as direct advice. 

Now that that’s clear, let’s begin.

INVESTMENT OPTION: Nordnet’s Månedsopsparing

It translates to “monthly savings”, but I would say “monthly investments” is a more accurate description of what this is. Nordnet, one of the largest investment platforms in Denmark, offers a service called “månedsopsparing”. I love this option, because it’s one of the most accessible options you can find. Whether you’re a student or unemployed, if you can “spare” 100 kr./ month, you can start investing through this service.

Why is Månedsopsparing so great?

Månedsopsparing is divided into 4 different categories – depending which category you choose, you’ll have access to different funds, and the minimum monthly investment is different. 2 of the 4 categories allow you to invest a minimum of 100 kr./month, and are also free – meaning that you don’t have to pay for this service (the other 2 categories will charge a fee of 10 kr./ month starting from the 8th of October 2023).

It is very easy to set up, and as long as you have money in your Nordnet account, investments will be made on a fixed date each month. Don’t have money in the account? No problem. Nordnet just skips this month. 

SO – cheap, low minimum investment and automatic.

I could easily write a whole article just about Månedsopsparing – and in fact, I did. So I won’t be going into technical details here, but if you would like to read a step-by-step guide on how to start your Månedsopsparing, go to https://moneylikealocal.dk/monthly-savings-for-anyone/. 

INVESTMENT OPTION: Aktiesparekonto

When you sell stocks in Denmark, you are taxed 27% or 42% of your profit (depending on how large the profit is). Aktiesparekonto (ASK) is a special type of account, regulated by the government. When you sell stocks from an ASK, your profit is taxed at 17%, no matter how much profit you have. The catch? You can only deposit 106.600 kr. (in 2023) into the account.

You can open an ASK at your bank or on an investment platform (like Nordnet or Saxo Bank). But before you open an ASK in your bank, make sure you’ll be with that bank for a long time, as it’s pretty much impossible to move your ASK. You would have to sell everything, close the ASK, start the ASK somewhere else, and then buy everything again.

The good part? The bank or investment platform will report everything to SKAT, so you don’t have to worry about that (you should probably check that everything was reported correctly, just in case). The bad part? ASK is “lagerbeskattet”, which means that you pay tax if stocks increase in value or get deductions if stocks decrease in value every year, no matter if you sell stocks or not. 

On the 31st of December every year, the value of the account is reported to SKAT, and based on that, you are taxed or get tax deductions. 

Another thing to keep in mind is that how much money you can deposit the following year depends on what the value of your account is when the value is registered on the 31st of December.

Here’s an example: You can deposit 106.600 kr. into the account. But in 2022 you only had 70.000 kr. to deposit, and you used the money to buy stocks. Let’s say you are super lucky, and by the end of 2022, your stocks had increased in value so much that they were now worth 110.000 kr. on the 31st of December 2022. This means that in 2023 you can no longer deposit money into the account, even though you did not deposit 106.600 kr. to begin with. On the other hand, if you were unlucky in 2022 and your stocks were worth 30.000 kr. on the 31st of December 2022, you could deposit 76.600 kr. more in 2023.

SAVING ACCOUNT: Børneopsparing

I’ve been talking quite a bit about børneopsparing on my Instagram account, because I think it’s an amazing opportunity. Børneopsparing is a savings account you can start for your child. You can only have one account pr. child. 

While Børneopsparing has a limit of 72.000 kr., you can only deposit 6000 kr./ year, which means that it takes 12 years to reach the limit. The huge advantage of this type of account is that the profit is 100% tax-free. How can you make money on this account? There are two ways: you can either make a deal with the bank and get interest (not all banks will offer interest though), or you can invest the money you deposit into this account. In fact, Børneopsparing is the only type of account you can offer your child, where the profit is 100% tax-free, no matter how large the profit is.

NB! You can only open a Børneopsparing account at a traditional bank. Be aware that there are services that market themselves as Børneopsparing, such as TOBI, and while it might be a good service, this is not a traditional børneopsparing, therefore the profit will not be tax free. Tobi suggests that you use your child’s fradrag (tax deductions) to make the profit tax free, but that will only work until your child gets a job (which in Denmark often happens around 15-17 years old). A traditional børneopsparing is tax free until the child is up to 21 years old. Specifically with Tobi, another disadvantage is that the service will invest the money for you, but you can’t choose specifically what you want to invest it in (which specific stocks etc.).

When can you open a Børneopsparing account?

You can open a Børneopsparing account from birth and up until the child is 14 years old, and you can bind it until the child is 14, 18, or 21. The minimum binding period is 7 years, and you can bind it further – so if you choose 14 in the beginning and change your mind to 18, then you have to tell the bank by the time your child is 11. If you choose 14 or 18 and you change your mind to 21, then you have to tell the bank by the time your child is 14. However, once you bind it to 18, you can’t change it to 14, and once you bind it to 21, you can’t change it to 18 or 14.

What does binding it mean?

It means that neither you nor the child will be able to withdraw money from the account during the binding period. If you bind it until the child is 14, then you, as a parent or guardian, will be able to access the money on behalf of the child, as the child is still a minor. It is important to note that you are required to only use the money in the account in the child’s interest (some Danes use the money for efterskole, a confirmation party, or similar). If you bind the account until the child is 18 or 21, then they will have access to the account, and you won’t be able to access the money on their behalf.

If you invest the money:

• All banks will allow you to invest the money from the Børneopsparing account, but some will only allow you to invest through their system (puljeinvestering – pretty much their own Tobi). Most banks will, however, allow you to invest the money yourself
• Stocks in a single company may not represent more than 20% of the portfolio, or maximum 12.000 kr., meaning that you can’t invest all 72.000 kr. into Tesla
• If your child chooses not to sell their stocks when they turn 18/21, the value of the account will be registered, and they will have to pay tax on the profit they make starting the following year. Example: Your child turns 21 in 2023 and chooses to hold onto their stocks for a few more years. Any profit they make starting from the 1st of January 2024 will be taxed.

Do you have to deposit 6000 kr. at once?

Not at all. 6000 kr. is the maximum amount you can deposit per year, but you can also deposit less if that’s what you can afford. Here are some common “strategies” to reach the limit:

• 500 kr. per month will get you to the yearly limit
• 1500 kr. every time you get “børnepenge” (4 times a year)
• 6000 kr. at the beginning or end of the year

With that being said, you can also choose to deposit 300 kr. one month, 2000 kr. the next month, nothing the next month and so on. It’s totally up to you.

SAVINGS ACCOUNT: Aldersopsparing

Aldersopsparing is a supplement to your pension that can be paid out once you retire. 

Before I start explaining more about Aldersopsparing, here are some types of pensions you should know about:

• Folkepension: state pension which you can get if you lived in Denmark for at least 10 years between when you were 15 years old and retirement age (you can read more about folkepension here in Danish)
• Ratepension: a private pension that should replace your salary once you reach the retirement age through monthly payments 
• Livslang pension/ livsrente: a pension insurance which will make payments starting from when you reach retirement age, for as long as you live

One important different between Ratepension, Livslang pension and Aldersopsparing is that when you make contributions to Ratepension and Livslang pension, you get tax deductions (fradrag). When you make contributions to Aldersopsparing (deposit money), you don’t get tax deductions. Here is a great comparison between the 3 (in Danish).

Why is an Aldersopsparing a good idea?

Again, if you choose to invest it, the profit will be taxed at 15.3% instead of the typical 27%/42%. Just like ASK, Aldersopsparing is taxed according to the “lagerbeskatning” principle, which means that you pay tax on the profit annually. It also means that when you get your Aldersopsparing paid out, you keep all the money. 

When is Aldersopsparing paid out?

Aldersopsparing can be paid out once you retire or reach retirement age, or you can choose to divide the amount and get monthly payments. 

How much money can you deposit into your Aldersopsparing?

You can deposit up to 8800 kroner per year. If you have 7 years or less until you reach retirement age, you can deposit up to 56.900 kr. per year.

Now this is going to get a bit technical, but bear with me:

If you have MORE than 7 years until you reach retirement age: if you deposit too much money into your Aldersopsparing during the year, you will be charged 20% of the “excess money”. However, if you then move the “excess money” to a pension that gives you tax deductions (for example, ratepension), you will instead only be charged 4% of the money.

If you have LESS than 7 years until you reach retirement age: if you deposit too much money into your Aldersopsparing during the year, you will be charged 40% of the “excess money”. However, if you then move the “excess money” to a pension that gives you tax deductions (for example ratepension), you will instead only be charged 4% of the money.

Still with me?

Some other facts about Aldersopsparing:

• Having an Aldersopsparing paid out will not impact your state pension
• Depositing money into an Aldersopsparing might affect social benefits that depend on your income (such as “boligstøtte” – housing support)
• If you want to have your Aldersopsparing paid out before you reach the retirement age, you will be charged 20% (with some exceptions, such as retiring early – “førtidspensionst”)
• Your employer can make payments towards your Aldersopsparing in the same way they contribute to a private pension for you. If they don’t contribute with 8800 kr./ year, you can deposit the rest so you reach the limit (you should be able to see on your payslips if/ how much they contributed)

So..

More than anything, I hope this article gave you a good base of knowledge and an idea of where you might want to start your investment or savings journey. If in doubt, always contact your bank advisor, as they will be able to give you tailored advice that fits your lifestyle, finances, and goals. But hey, it’s always best to ask specific questions, if you want specific answers. And how can you ask specific questions when you don’t have knowledge about your options? And how can you have that knowledge when you don’t speak Danish and everything is in Danish? 🙂