1st February 2021

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."
Father searches on tablet for investment opportunities for his child

Inflation matters

First of all, do you remember what you were able to buy with EUR 20 back in 2002, when the euro was launched? Today, the purchasing power of these EUR 20 is significantly lower because prices have gone up a lot for most goods. Knowing that, instead of thinking of the amount of money your child will get, think of what he will be able to buy with the money you saved for him so far.

If you have 0,5% interest on the savings account of your child and the inflation is at around 1%, you will for sure lose purchasing power over the years, while you think that you are actually “saving” money.

In such a scenario, having EUR 10.000 on your savings account today will only be worth EUR 9.500 in about 10 years’ time.

Do not underestimate the duration of childhood

Think about it: on one side, kids are growing up very quickly, that is for sure. On the other side, parents tend to save money for their children until they are 18 years old, so for several years, they are putting money on the side.  Don’t you think that in this time period, there is something smarter to do  regarding your savings options?

S&P 500 Index Rolling Returns

The period of childhood which is extended in several years, is to be considered as your main asset. The longer your time horizon is, the less probable it is for you to lose money in the stock market. As an example: Since 1971, there is no 15 years’ time frame when an investment into the S&P500, a large U.S. index, would have resulted in you losing money.[1] [2] Investing is your best alternative.

If there is one occasion when investing is a great idea, it’s surely all over your kids’ childhood.
Luc Sinner, Deputy Head of Marketing

Investing has never been easier

In the current context, investing seems to be the better idea. However, in what should you invest? How to choose the right asset? You do not yet feel comfortable enough to make this decision? Ask your Spuerkeess Personal Banker so he will find the right solution for you.

[1] Time is your most valuable asset. THEBALANCE.COM / DANA ANSPACH
[2] Past performance of an investment product does not predict future returns.

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