It is very important that you save money for the future of your children. However small they may be today, they will end up growing and you will have to face communion, the end-of-school trip or the university , to name some expensive events. Your home economy should be ready when those moments come. But the question is: what should you do with saving your children?
Many families wonder if that savings intended to meet the future needs of their children should be invested or not. The answer is yes. If you don’t want inflation to devour the purchasing power of that money, the best alternative is investment .
Inflation is not your friend in saving your children
Imagine that you have saved 100 euros and that with that money you plan to buy a gallifante that costs 100 euros. Imagine also that you postpone the purchase decision one year. If inflation during that year is 2%, next year your 100 euros will not be enough to buy the gallifante, which will now cost 102 euros. You have the same money but your purchasing power has been reduced . Hi inflation.
Thanks to the investment you make sure that your money will not lose value, since this will grow at a faster rate than inflation and that will allow you to gain purchasing power year after year. In other words, you will earn money thanks to your money .
Following the previous example, if you had invested 100 euros and achieved an annual return of 5%, by the end of the year you would have had 105 euros. With that money you could have bought the rooster and you would have left 3 euros. Goodbye inflation.
Where to invest
Once you are clear that you should invest the savings for the future of your children, the next question is: where to do it? That is, among the endless investment options that exist in the market, which one is the most appropriate for your savings?
There is no valid universal answer to this question, since it will depend on many factors: for how long are you not going to need that money? What profitability would you like to get? How much risk are you willing to take? To what extent do you want to get involved in managing your investment?
In general, the three simplest investments you can make with your children’s savings are these:
Today there are countless investment funds. If you do not want to complicate your life more than necessary, this financial product is the most interesting option. The profitability offered by different funds will depend on many factors. For example, if it is fixed income or variable income. On the other hand, they offer great tax advantages, since they are only taxed when they are rescued.
The purchase of publicly traded shares is another form of investment to save your children quite interesting, although a bit more complex. For example, you can earn money by buying shares of companies that distribute dividends at the end of the year. Another option is to buy shares whose price is low thinking of selling them when the price is higher.
If you want to invest the savings of your children in the stock market but you don’t have great knowledge, you can invest in an index fund or an KHL. Both products replicate the behavior of a stock index and combine the advantages of investment funds and stocks, in the sense that they are diversified and offer interesting returns.