The eve of All Saints’ Day was not only celebrated Halloween. It was also the World Savings Day, a day that aims to raise awareness about the importance of this habit and its benefits in managing our personal finances. Internalizing this concept from an early age results in a greater ability to allocate these savings to healthy investments that pay for normal expenses and also projects that require larger efforts and budgets.
The percentage of Spanish saving households doubles when they have a basic economic education, according to the report “Determinants of household saving: financial education, protagonist”, prepared by the Family Savings Observatory. Specifically, the percentage of households that dedicate income to savings goes from 40% to 80% when this training is completed.
The strategies to promote saving among the little ones are extensive. From Abanca they mention some, such as using a piggy bank, that the monthly payment is administered by the minors, taking stock of monthly expenses or creating a children’s savings account. However, you can also instill investment habits that give continuity and benefit to that saving during youth.
Reliable sources … and some rules
The investment world is usually associated with “adults with high purchasing power,” Bankinter explains on its digital blog. The bank points out that the financial world has become democratized and offers alternatives that do not require a lot of money, such as crowdfunding platforms or automated investment managers called roboadvisors . Before considering which are the appropriate investment options, the youngest in the house should know the keys to taking safe and successful steps in the world of finance.
Among the aspects that novice investors should cultivate, inBestMe highlights that “simplicity and time” are the best allies of the youngest. A long time horizon predisposes investments to be successful, says this financial institution. Also, the market can overwhelm a person without deep financial knowledge and experience. Therefore, “the best investment strategy is to create a low-cost, diversified portfolio of assets.”
MiCappital advisors emphasize in the same vein that the early stages of life are a good time to instill financial culture, both in theory and in practice. Expenses in adolescence and early years as adults are covered by the parents. This opens the door to creating a savings bag that, in part, can be dedicated to investing to meet some vital goals. “If you have been lucky that they started with you in childhood, you can allocate that money to a master’s degree that brings you closer to a well-paid position, to start a business or to pay for the entrance of your future home,” they value from MiCappital.
An ingredient that cannot be lacking in financial education at an early age is official and attractive sources for learning. Stresses the web finanzasparatodos.es , promoted by the National Commission for the Securities Market (CNMV) and the Bank of Spain. This portal offers educational and informative content for the planning of citizens’ personal finances, including a section entitled: “How to invest your money?”. There the differences between saving and investment are addressed, the importance of choosing well between the offer of financial products or concepts such as the risk-return binomial .
Also, some rules like these two that Allianz highlights can be of help for the youngest. The rule of 120 defends adapting investments to each vital moment. “A young saver can take on a higher level of risk and reduce it significantly as the years go by,” says the German firm, which also notes John Bogle’s theory: investing in fixed income the same percentage as your age ( a 25-year-old should therefore invest 25% of the excess savings in bonds).
Learning and investing in an account
There are accounts to strengthen the investment habit among minors. The Young Openbank Savings Account is one of the options to take the first steps: it offers from the first euro deposited a fixed return of 0.15% APR, ensuring a small interest from the beginning.
The MyInvestor Junior Account gives a small remuneration for savings: the first year the interest it generates is 1% (up to 15,000 euros). It allows children to invest in the entire portfolio of the entity, just like adults. It also allows you to make contributions of money to funds automatically, but always under the supervision of the elderly and with advice.
There are other roboadvisors (automated managers), such as the ones you can consult on Finect , that initiate young people in investing. This is the case of Indexa Capital and its portfolio of funds for minors. It requires a minimum of 3,000 euros and the only owner is the minor, although one of the parents is the legal representative. This product is designed to initiate investment for adolescents with a view to creating savings for studies after school.