Investing for the future of your children

When you become a parent, carefully planning your tomorrow becomes a top priority. If the financial security of your family is uppermost in your thoughts, start investing for your children now. Discover in our article the tools you have at your disposal to offer your loved ones greater financial peace of mind.

Investing for your children: when to start

According to writer Laurent Gounelle: “The moment the baby is born, we suddenly know that we are no longer the most important person in the world in our own eyes. ". And it's not just a cliché, birth comes with an increase in responsibilities. With these come concerns about the future you can offer your child.

It is not only about everyday expenses, education and recreation, but above all about future prospects. That is why it is never too early to start investing for your children: ideally, the earlier the better (or perhaps when you receive some unexpected money from an inheritance or insurance). In this way, you will be able to think long-term, reaping the benefits of the main financial solutions on the market, and form a sort of small (or hopefully large) piggy bank.

The most common solutions

As with any other investment, there is no 'one size fits all'. The financial products currently available in France have different characteristics: like a tailor-made suit, you have to select the one that fits you best. And if you want to learn more about investing for your children, our financial education section can also offer you extra support in making an informed decision.

Not sure where to start? Let's see which are the most popular options in France.

Youth account for children (for example, the Livret A Jeune)

The best known solution for those who want to invest for their children, probably because it has existed for decades, is the classic children's savings account which must be registered directly in the child's name. This is a regulated savings account reserved for children aged between 12 and 25. The first payment must be a minimum of €10 and there is a maximum ceiling of €1,600.

Payments can be made in cash, checks or internal transfer from an account opened in the same banking establishment. It is possible to withdraw the money at any time. But the account balance must be equal to at least €10. A withdrawal card can also be offered. In general, there are no fixed costs and its taxation is advantageous. However, the children's savings account has a low return, higher than that of the Livret A but generally below inflation.

Savings plans for children

Another solution is investment plans for children. Unlike the savings account, where amounts can be credited freely, this formula is based on periodic payments into a special fund. The capital is then managed by the bank or insurance company with which the plan was concluded.

At the end of the contribution period set in the contract, it will then be possible to redeem the capital with the accumulated returns. The return depends on the financial products in which the mandated company chooses to invest the money.

ETFs savings plans

An innovative choice in this area are savings plans in ETFs (Exchange-Traded Funds), which offer several advantages over traditional funds often offered by banks. ETFs are known for their transparency and low management costs. Unlike mutual funds, ETFs replicate market indices, reducing the performance risk associated with active management and offering broader diversification. Moreover, ETFs are generally more liquid and flexible, allowing investors to react quickly to market changes. Investing in ETFs through savings plans can therefore be an effective way to build a diversified, low-cost portfolio suitable for a long-term investment strategy for one's children.

Housing savings plans (PEL) and housing savings accounts (CEL)

These two investments are popular regardless of age. They can, however, be opened for minors and therefore constitute a savings solution between 0 and 18 years old. As their names indicate, the housing savings plan (PEL) and the housing savings account (CEL) are intended to ultimately finance the purchase of real estate. Beyond the interest earned, which is generally lower than inflation, the main advantage of these investments is that they offer access to an advantageous real estate loan.

The PEL can be opened with a first payment of at least €225. In subsequent years, it must be funded at a minimum of €540 per year. These payments can be scheduled or one-off. The PEL is capped at €61,200, excluding capitalization. It is possible to make payments into a PEL for 10 years after opening, and it continues to earn interest for another 5 years. The PEL is intended for a minimum duration of 4 years, a withdrawal before this anniversary results in the closure of the plan and does not allow you to benefit from the preferential rate loan.

The CEL has a more flexible operation than the PEL, but lower interest rates, these being set at 2/3 of the rate of the Livret A. To open an account for a young person, a first payment of €300 is necessary, this is also the minimum balance. Withdrawals and deposits are possible at any time. The CEL is not limited in time and its ceiling is set at €15,300 excluding capitalization.

For both investments, interest earned is subject to income tax and social security contributions at the time of withdrawal. PEL and CEL can be combined, provided they are subscribed to in the same establishment.

Investment plans on behalf of parents

In addition to the possibilities listed above, it is also possible to make investments in one's own name, to be allocated to one's children according to one's financial goals. This option grants more freedom of action, since it is not tied to a minor. In addition, one can bet on a varied portfolio to maximise the chances of increasing one's invested capital and thus ensure a prosperous future.

Are you thinking of investing for your children? Find out how Scalable Broker can help you make your savings pay off.