Camille Van Vyve
14 Mar 2024
Would you rather save or invest for your child?
Gone are the days of the super-advantageous “young savings account” offered by most of the major Belgian banks. For 15 years, the interest rates offered on savings accounts have been so low that the formula has completely lost its appeal. But why not rather invest for your child? The gift, in the end, will certainly be more generous.
Saving from an early age
When it comes to investing, the first rule is to start early. Because over time, your savings will not grow linearly like those of a squirrel, but exponentially through the magic of compound interest, which is also reinvested year after year. Investing for your child from an early age means letting him benefit from this exponential growth as soon as possible, regardless of the size of the capital invested at the start.
Long horizon = greater risk tolerance
Similarly, by investing early for your child, the investment horizon he will benefit from will be long, since the money will not be released before he reaches majority. Eighteen or even fifteen years of investment horizon is godsend for an investor! This makes it possible to meet all the conditions necessary for an investment totally or almost totally in shares, and to expect a return of around 7% per year on average.
Dare to talk about money with your children
Moreover, as the years go by, the process will be an excellent starting point for tackling the subject of investment and the functioning of financial markets with your children – a subject unfortunately very little covered in the traditional school curriculum. As they approach majority, the future account holder will also need to be made responsible for the use that will be made of the amount made available to them and the importance of savings in a future professional career.
Blocked account until 18 years old
A securities account may be opened in the name of a minor by a legal representative, generally a parent. The transferable securities placed on the account are considered as belonging to the minor; the legal representative undertakes to manage these assets with due diligence and in the exclusive interest of the child. At the age of majority, the child will freely dispose of the sums invested in his name.
Open an account in the name of or for your child?
If you want to keep some control over these amounts, you can also choose to invest for your child without placing the money in his name (or choose for a combination of the two formulas). You will thus be able to dispose freely, and at any time, of the sums saved.
What in the event of death?
Although it is not in the order of things, the premature death of a child has consequences for the investments made in his name. If the minor holder of an account were to die before reaching the age of majority, it is his legal heirs who will inherit it, namely his parents. But you will obviously have to pay the inheritance tax in force.
Note: This article was written when Easyvest was authorized and regulated by the FSMA as an agent in banking and investment services.