How to save for children? The building is not worth it, the analyst breaks down the experienced trend

Michal Hron | 7. 4. 2022 | 44

While abroad it is relatively common for parents to invest in their children from birth, in the Czech Republic we often rely solely on building up savings. However, this does not cover inflation and the money loses its value. “But when there is a tradition, we go after the most widespread,” explains Anna Kortusová of the Porto investment platform in the following Finmag podcast. She is trying to change this trend.

How to save for children?  The building is not worth it, the analyst breaks down the experienced trend

Anna Kortus, investment analyst in Porto, in the Finmag podcast

Source: Tomáš Cetkovský

Kortusová points out that they are focused on investing for children in Porto. “At the end of last year, we surveyed how parents put their money aside. The finding was positive that most parents put money aside for their children, which was approximately two-thirds of respondents,” he says.

At the same time, however, the survey revealed that people generally choose very conservative products. “Building up savings is the most traditional product where parents save money for their children. It has an almost zero risk advantage and a state contribution of almost two thousand crowns per year”, recognizes the analyst.

The disadvantage of such an approach, however, is the very low interest rate, which is far from covering inflation. It reached 11.1% in February and the central bank expects further growth. In fact, building savings money loses its value.

“Currently, interest rates on the construction site are around one and a half percent, which is absolutely not enough for inflation,” Kortusová points out, adding that in addition to building up savings, parents also most often use children’s savings accounts. invested.

The money saved can be used by the children for studies, or as the basis for a mortgage, the purchase of their own home…

Investment for children

The Porto investment platform analyst sees why these instruments are winners in the very nature of the Czechs, who are generally very conservative in their investments. “If there is already such a tradition and maybe they don’t have much insight into investment opportunities, then they just go for the most common investment here. And they follow in the footsteps of their entourage.”

From a parent’s perspective, this is essentially a very long-term investment, as many save money for their children from birth. “That means they have an eighteen-year investment horizon there, and it’s definitely worth putting that money into a product that will value them and not let it hang around,” the analyst warns.

According to Kortusová, equity investments are suitable for such long strategies. “Of course, you have to diversify, not just choose the three values ​​​​that dad trusts”, points among other things to the gender trend, where investments for children are generally decided (and managed) by men. “For mutual funds, you have to beware of high fees,” warns Kortusová of an unfortunate choice.

According to her, the money is more than useful for children when they enter adulthood. “They can use it, for example, in their studies, or as a basis for a mortgage, buying their own home,” he calculates. That’s why Porto is trying to change this long-standing tendency of parents to choose conservative products.

Carrying over a thousand a month, a child of eighteen can have half a million crowns, which is a good sum to enter into adulthood.

The long-term strategy is working

According to Kortusová, not only from the point of view of investing for children, it is important to always diversify investments well between asset classes. “That means creating a portfolio that is diversified and not just focused on equities,” he says, adding that the equities strategy, for example, is suitable for horizons longer than ten years.

“But if we look at some medium and short-term investments, there is always a need to supplement the portfolio with, for example, bonds or other components, such as the real estate component, or value depositories, which are considered gold.”

In addition, long-term investments do not require dizzying deposits, but the regularity and careful selection of such a product, which is not associated with excessively high fees, are more important. “For example, by setting aside a thousand a month, an eighteen-year-old child can have half a million crowns, which is a nice sum to enter into adulthood.”

In the podcast you will also hear:

  • What exactly is a children’s investment account?
  • How to best build an investment portfolio
  • How many people save most often per month
  • How the child can manage the money saved
  • What positive effect do children’s investment accounts have

Or now? Podcast on Finmag.cz:

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