Five questions and answers about saving money for your child

Saving money for the future of your children is a topic that is increasingly being talked about in social media groups, but also among groups of friends. What is clear is that saving is reasonable, and there are different ways to do this. We will answer the five most common questions that parents usually have.

1. Should you just put money aside, or put it somewhere where it can grow?

One of the first and main questions that arises for parents who have made the decision that they would like to save money now and in the future for the benefit of their child’s future is whether to simply collect money somewhere, such as in a jar or a piggy bank, transfer it to a separate bank account, or whether it is worth looking for opportunities to enable the money set aside to also grow. If the goal is to save money over a longer period of several years and consistently, it would in any case make sense to use a corresponding money-growing product for this purpose.

While money just sitting at home or in a bank account loses value over time, the purpose of investing is to make the money grow in such a way that the profit earned protects the money from increasing prices. They say that the right time to start investing was yesterday. Time is simply the most important factor, because it is the reinvestment of the earned profit over a long period of time that brings the greatest result. This is called compound interest, meaning that the profit you have already earned will, in turn, earn you a new profit. Fifty euros that are sitting idly by will never turn into EUR 60 over time.

2. How often and how much money should you set aside?

There is no single correct answer to this question. As always in the case of achieving long-term goals, one of the most important elements is consistency. Therefore, instead of putting money into the Growth Account once per year, after your child’s birthday, for example, it would be much more beneficial to contribute monthly, even if only a little at a time. Thus, investments are also dispersed in terms of time, and the habit of saving regularly is established.

Increasingly, the practice is that the monthly child allowance from the state is transferred to the child’s Savings Account, and sometimes a little more is added to it by the parent. The national child allowance for the first and second child is EUR 80 per month. For example, LHV statistics show that, on average, Growth Accounts of minors receive EUR 90 every month.

3. But I don’t know – how does all of it work?

One of the main reasons why people decide to just save money or postpone starting with investing is fear – fear and ignorance of where, how much, and how to invest. The LHV Growth Account was created precisely to make investing manageable for everyone.

The Growth Account is intended primarily for long-term saving, not for trading shares. All investing is done automatically through the Growth Account, meaning that you pick the companies or sectors you have faith in, and every Wednesday, an investment is made automatically using the money in your account. No entry of orders and no scheduling required. You choose and configure where, how often, and how much you want to invest, and everything else takes place automatically. The greatest attraction of long-term investing is the consistency – thus, after 5, 10, or 30 years, it is great to discover how large your portfolio has grown even with very small contributions.

4. How to choose where to invest your money?

The second question that arises after the decision to open a Growth Account is where or in what should you start investing your money. The simplest answer would be to choose what you believe in and understand. The LHV Growth Account range includes nearly 50 funds, i.e., investment opportunities diversified among different companies and sectors, as well as 30 individual stocks, including, for example, the famous Apple, Microsoft, Tesla, and others. Often, the shares of successful companies are also expensive, but the Growth Account also allows you to buy these shares in fractions, even for just a few euros.

Depending on the age of your children, you can also involve them in making choices for the Growth Account – discussing together what could be important and appealing, what could have a future, what has historically done well, and what are riskier choices. You can find the descriptions of funds and individual shares on the LHV Growth Account page. Over the years, you can keep an eye on your investments together, generate interest in your children in the economy and investing, encourage them to improve their knowledge on their own, and thus increase the likelihood that the children will continue to grow money when they become adults.

5. What will come of this money you have saved?

There are different reasons to save and grow money for the future of your child. Some want their child to have more freedom in the future, others want to give the child the freedom and time to think about what to do after school. One of the most common recent goals is to use the Growth Account to save money for a home down payment. LHV has made this very convenient for its clients by allowing them to transfer the money accumulated in the Growth Account directly to a home down payment at the appropriate moment without any service fees. Thus, when a child reaches the age of majority in the future, they can use the money grown over the years as the down payment for their first home. By the way, it is usually the lack of a down payment or the complexity of saving up for it that is the main reason why young people postpone buying a home.