You want to save money for your child. We see life getting more and more expensive, and we hope to give them the best for the future. Or maybe you wish to save for their studies, their driver's license or the purchase of their first home.
If you start on time, even a small amount of money per month can make a big difference later. A simple calculation: if you pay 25 euros into their account every month, they will still have €5,400 when they turn 18. And of course, the higher your monthly deposit, the bigger that amount.
Why index investing for your child?
Saving is safe, but it does not yield as much in the long run. Investing in stocks and shares is riskier, but provides better returns eventually. More and more parents are therefore choosing to grow their child's saving jar in an index fund.
For smart index investing with the least risk, you need a globally diversified and market-weighted index fund. With this, you invest in thousands of stocks. This is much less risky than investing in just a few stocks. In addition, years of research show that this also provides greater returns than active investing.
The same €25 per month in an index fund can grow to over €11,000 in 20 years. This is, of course, an estimation, and the amount is based on past experience and performance.
5 steps to investing for your child
Investing for your child is not complicated. In five steps, you are well-prepared to invest.
Step 1: Decide on your initial deposit and your monthly deposit. Decide how much you want to deposit when you open the account. It is important that you can really miss this money for the next 20 years, so you don't suddenly need it when there is a financial dip.
In addition to setting aside a monthly amount for your child, you can also choose to invest your child benefits. Each quarter, when the child benefit comes in, it is automatically deposited in your investment account.
Flow works with Meesman Indexbeleggen, a fund manager with a worldwide spread index fund. Keep in mind that investment funds expect a minimum monthly deposit, for example at least €100 per month. Meesman Index Investing has a handy calculation tool, so you can quickly see how much you can invest yourself and how that amount grows over the years.
Step 2: Choose: invest in your name or in your child's name. Decide what is the best option for you. Do you invest the money in your name, or do you open the account in your child's name? Both have advantages and disadvantages, which you will have to weigh for your situation.
Investing in your name means that the amount is yours, now and later. It counts towards box 3 for the tax authorities. If you want to give the money to your child later, you will have to pay gift tax on it. Only from that moment on will the assets belong to your child. The advantage is that the money is yours and remains so until you decide to donate it.
Investing in your child's name is also possible. To do this, your child needs his or her own bank account. Every deposit you make is a gift to your child. This can be done annually tax-free up to a certain amount (in 2021 it was €6,604 and in 2022 it is €5,677). The money belongs to your child, but until the 18th birthday you manage the account. Until then, the assets fall under box 3 with the tax authorities. You are not allowed to use the money yourself. From the 18th birthday, the assets belong to your child and your child can decide for itself what it wants to do with them. You do not have to gift the amount and therefore do not pay gift tax.
Step 3: Open an investment account. Flow works together with Meesman Index Investments. You can link your Meesman investment account to your automated cash flows in Flow. You can read more about index investing with Flow and Meesman here.
Step 4: Automate your investment in the Flow app (monthly or child benefits). Set up Flow the way you want it. Make your investments fully automatic by having the money transferred to your investment account as soon as your salary (or child benefit) arrives. Replenish your buffers. Do you have money left over at the end of the month? Have it automatically transferred to Meesman before your new salary comes in.
You can do this easily from the Flow app, using the flows we set up with Meesman. The Flow app has ready-to-use templates, so setting it up will only take you a few minutes.
Step 5: See your child money grow! You've set up your flow and you're automatically building your child's future. Now you can peacefully spend time with your family, knowing that you have everything in place.
Just sit back and relax.