Investing money on the first day of school: a meaningful present for year one pupils

Children and families alike celebrate the first day of school as the start of an exciting new
phase of life. Parents, grandparents, aunts and uncles have to decide on the perfect gift
to celebrate the occasion. We suggest making a financial contribution that grows as the
child grows and will bring them joy in their future: a carefully chosen investment.

The most important thing to decide on before investing money is the goal. For example,
do you want an investment that will help your first grader pay for their driver’s license
once they turn 18? Or would you prefer to get them started on their retirement fund
early?

Deciding on the goal of the investment will help you make other decisions, such as how
much money do you want to invest? Do you want to invest a lump-sum or add money to
a savings scheme on a regular basis?

Our tip: you don’t have to pay for a larger gift all at once. You can slowly add money on
special occasions, such as birthdays or other important milestones: communion,
confirmation, graduations and so on.

Important: you can open an account or fund in the name of the child. If you do, the
money will belong to the child right from the start. Until the child turns 18, their parents
will have power of attorney over the account or fund and can make decisions on behalf of
and for the benefit of their child. The child’s declaration for exemption will be used for tax
on any returns. Once the child has turned 18, they will be able to access their account or
fund themselves.

Savings schemes: flexible, potential for growth, small instalments

Once the child turns 18, they can decide how they want to use the money – provided you
have invested in their name. They might decide to pay to get their driver’s license, or
perhaps use the money to support themselves during their education. However,
whatever you imagined they would use the money for can provide a clue as to what type
of investment you should choose.

One question you will want to answer in advance is: do you want to be certain that the
child will have access to at least X amount on a particular date? In that case, you will
want to consider secure investment options, such as a fixed term deposit or savings
scheme that invests in a fund, or perhaps an insurance policy with a guaranteed payout.
Savings schemes offer you flexibility. You can select the amount you want to pay into the
savings scheme based on your own finances. Many schemes offer instalments starting at
just 10 or 20 euros. You can then adjust the monthly instalments to your current
finances, or even pause payments if necessary.

More returns mean more risk. If you don’t need to save a certain amount by a specific
date, you might be willing to take on more risk. If that’s the case, you can consider
investing in shares, equities and multi-asset funds or exchange traded funds (ETFs).
These have proven to be worthwhile investments. In the past, an investment horizon of
more than 15 years has shown a very high likelihood of generating returns. However, it’s
important that you plan ahead and reduce the amount of risk in the investment as you
move towards the end of the savings period. This will ensure that you are not surprised
by price slumps when it comes time to withdraw the money.

Here, too, you could use a savings scheme that invests in funds using relatively small
instalments to build up significant wealth while remaining flexible. You can change the
term, adjust the instalment or pause it at any time. By purchasing additional securities,
you can also slowly but surely expand your funds.