Increasingly, instead of communion gifts, children receive money. How to best use money from communion, how to find a compromise between the fulfillment of a child's desire with dream gifts and the wise development of the money received during the ceremony. What are the possibilities of investing money from communion and benefits for a child from systematic saving.
Gift or money?
A gift or money – this is a dilemma of many people. On the one hand, we want to give someone a souvenir, on the other, we are not always sure if our choice will make the recipient's joy. That is why it is usually easier for us to give you just cash. However, in the case of children there may be doubts whether they will know how to order it reasonably. And money from communion is often substantial. It can be assumed that it is several thousand zlotys. The release of everything on gifts seems unreasonable, especially since, for example, electronics is not an investment. That is why it is worth considering the compromise: for part of the money to give your child a gift, and invest the remaining amount for future needs.
In addition to the benefits of investment, we can give a very valuable gift – financial education, which will pay off in his adult life.
Where to invest money and for what purposes?
There are many investment opportunities, and bank deposits, bonds and shares are among the most available and popular. The investment goal may, for example, be the future education of a child or collecting money for their own housing contribution. Let's check how much money can be accumulated if the investment amount is 5,000. PLN.
If the goal is to raise money for education, the investment period is 10 years. Children usually have communion at the age of nine, and start their studies at the age of 19. For calculations, let's assume that the average annual return rate from bank deposits is 3 %, 6 % bonds. and shares 9 percent After 10 years, taking into account the annual capitalization on a bank deposit, we will accumulate PLN 6,720, in bonds PLN 8,954, and in shares PLN 11836.
If the goal is to collect your own contribution, we can assume that the investment period is 17 years – from 9 to 26 years of age. With the same assumptions regarding the interest rate after this period, we accumulate PLN 8,264 on the deposit, in bonds PLN 13,464, and in shares PLN 21638. If we take into account future inflation for these calculations, we can conclude that future amounts will only allow future goals to achieve.
The situation will change significantly if we treat money from communion as a child's initial capital and we also decide to spend PLN 200 per month for the child's future purposes, for example from the 800+ benefit or a tax relief per child. Then, after 10 years, we will collect PLN 3,5058 on bank deposits, on bonds PLN 42486, and on shares PLN 5,581. In the case of saving for your own housing in 17 years, these amounts will be: in the case of deposits PLN 62058, bonds PLN 8,5237, shares PLN 118361. Such amounts will successfully help in achieving the assumed goals. The calculations carried out do not include taxes on investment profits, so when you decide to save, it is worth considering IKE and IKZE solutions.
What products to choose?
We can set up deposits at the bank. It should be remembered to reinvest the money after the deposit expires, that is, set up new deposits for the next period. Long -term deposits will work best in high interest rates and expectations for reduction of interest rates.
In the case of bonds, it is best to focus on security and choose the Treasury bonds, whose coupons are based on inflation. In this way, we will avoid the risk of changes in inflation and interest rates. It is worth mentioning that for people receiving benefits 800+, the State Treasury has prepared a special offer of treasury bonds.
If we decide to invest in shares independently, then we should set up a brokerage account or a register of investment funds and place a purchase order each month. Therefore, the most convenient form of investing will be, for example, choosing a systematic saving plan in investment funds, in which we can submit a permanent instruction to acquire units of investment funds for a fixed amount.
Investing in financial instruments (bonds, shares, investment funds) is associated with risk, therefore before starting, it is also worth contacting, for example, an advisor at a bank, which will explain the specificity of financial instruments, possible solutions and risk related to investing.
How to convince a child that it is worth investing?
A child at the age of nine does not think about the future as much as adults. Therefore, the role of parents is to introduce a child to financial education. Money from communion is a good opportunity for this. To educate a child, we must engage them, that is, explain the purpose of investing, the expected benefits. The child should participate in investments at the stages of deposits, payment of interest, browsing investment results. An additional motivation may be to transfer some of the profits to the child to any purpose. Awareness of the child that the money spent comes from his savings has a great educational value.
The presented simulations of future amounts are based on the assumptions regarding future rates of return, and although they are not a guarantee of achieving these amounts, they are aimed at illustrating the saving mechanism and the benefits of it flowing. The best solution that can most help in achieving future child's goals is to combine money investments from communion with regular saving, even small amounts. In the case of regular saving in the long run, shares work best, but on the other hand they are characterized by the highest price variability. Investing in bonds is more safe, but less profitable. In addition to the financial benefits, we give the child a valuable gift. We introduce a child into the world of investment, teach how to deal with finances and basics of building property. Financial education is not present in our schools, and the experience gained from independent capital management at a very young age may prove invaluable in the future. That is why communion is a good time to start the child's adventure with investments.
Jacek Stąpała, Senior Product Manager for the Credit Agricole investment
