Why you should switch from saving to investing for your children

"It’s a fact that most of our customers open a savings account for their children at birth. And being a young father myself, I perfectly understand that this is very convenient to do so, in order to permit family and friends to easily put some money on it at any occasion. The first months with a baby are indeed not the best ones to think about finance. However, let me explain why they are actually the right ones to choose an alternative, smarter way of saving money."

To save properly, it's essential to take inflation into account. Remember: what could you buy with EUR 20 in 2002, when the euro was introduced? Today, that same banknote has lost value. Here's why: prices have risen sharply for a large number of goods and products.

Inflation has been particularly marked in recent years, with a rate of 6,3 % in 2022 and 3,7 % in 2023.

Rather than focusing only on the amount of money you will put aside for your child, ask yourself what they will actually be able to buy with that money in a few years' time. With this in mind, you'll be able to better protect their savings against the loss of value due to inflation.

If you have 2,32%* interest on your child’s savings account and inflation is 3,70%**, you will definitely see a loss in purchasing power over the years, when you think you are actually “saving” money.
Luc Sinner - Deputy Head of Marketing

*Average interest rate for 2023 on the Tweenz savings account (0-12 years) for savings less than or equal to EUR 100.000
**Average inflation rate for 2023 – source: STATEC: Inflation - Statistics Portal - Luxembourg

This negative difference of 1,38% between the interest rate and inflation gradually erodes the real value of your savings.

In such a scenario, the EUR 10.000 you have today in your savings account will only be worth EUR 8.719 in about ten years. Given this significant loss of value (i.e. EUR -1.281), it is worth searching for better-performing alternatives to preserve and grow the wealth of your children.

Historically, the global stock market has shown a long-term growth trend, despite short-term ups and downs. The MSCI World index represents an important benchmark as a starting point for investment.

What is the MSCI World Index?

In finance, an index is used to understand how the stock market is performing. The MSCI World is a global index that captures the performance of 1.500 companies (large and medium-sized), spread over 23 developed markets worldwide, including North America and the US, Europe, Asia and Australia.

Source: MSCI World Index

We often say that children grow up fast. However, as a parent, you actually have more than 10 to 20 years to save for them - a valuable and often underestimated period to invest intelligently.

This long-term savings horizon provides an ideal framework for building a coherent investment strategy capable of generating solid returns.

Why take this into consideration? Because by combining regular investments with a long-term vision, you create the ideal conditions for benefiting from the growth of the financial markets. The MSCI World index has posted an average annual return of around 8% over more than 10 years - despite occasional economic crises.

If there's ever an ideal time to invest, it's certainly during your children’s childhood. Regular investment, combined with a long-term horizon, creates the optimal conditions for profitable investment.
Luc Sinner - Deputy Head of Marketing

In other words, the duration of childhood is a unique opportunity to grow capital. Not only does it allow you to cushion any market downturns over time, it also allows you to take full advantage of growth phases.

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