How to start investing from a young age? Reasons to take the step

Santiago Barón
Finect

The eve of All Saints' Day was not only Halloween. It was also World Savings Day, a day that aims to raise awareness about the importance of this habit and its benefits in managing our personal finances. Internalizing this concept from an early age results in a greater ability to allocate that savings to healthy investments that cover the usual expenses and also projects that require larger efforts and budgets.

The percentage of saving Spanish households doubles when they have a basic economic education, according to the report "Determinants of household savings: financial education, the protagonist", prepared by the Family Savings Observatory. Specifically, the percentage of households that allocate income to savings goes from 40% to 80% when this training is mediated.

There are many strategies to encourage savings among children. From Abanca they cite some, such as using a piggy bank, that the monthly payment is managed by minors, taking stock of monthly expenses or creating a children's savings account. However, investment habits can also be instilled that give continuity and benefit to that savings during youth.

Reliable sources... and some rules

The world of investment is usually associated with "adults with high purchasing power," explains Bankinter on its digital blog. The bank points out that the financial world has been democratized and offers alternatives that do not require having a lot of money, such as crowdfunding platforms or automated investment managers, called roboadvisors. Before considering which are the appropriate investment options, the youngest members of the house should know the keys to take safe and successful steps in the world of finance.

Among the aspects that novice investors should cultivate, inBestMe highlights that "simplicity and time" are the best allies of the youngest. A broad time horizon predisposes investments to be successful, says this financial institution. Also, the market can overwhelm a person without deep financial knowledge or experience. For this reason, "the best investment strategy is to create a diversified and low-cost portfolio of assets."

How to start investing at a young age? Reasons to take the plunge

MiCappital advisors stress in the same vein that the early stages of life are a good time to instill financial literacy, both in theory and in practice. Expenses in adolescence and early years as adults are covered by the parents. This opens the door to creating a savings bank that, in part, can be dedicated to investing to cover some vital goals. "If you have been lucky that they started with you in childhood, you can allocate that money to a master's degree that will bring you closer to a well-paid position, to start a business or to pay the down payment on your future home," they value from MiCappital.

An ingredient that cannot be missing in financial education at an early age are official and attractive sources for learning. The web finanzasparatodos.es stands out, promoted by the National Securities Market Commission (CNMV) and the Bank of Spain. This portal offers didactic and informative content for planning citizens' personal finances, including a section entitled: "How to invest your money?". There the differences between savings and investment are addressed, the importance of choosing well between the offer of financial products or concepts such as the risk-return binomial.

Likewise, some rules like these two that Allianz highlights can be helpful for the youngest. The rule of 120 advocates adapting investments to each vital moment. "A young saver can assume a higher level of risk and reduce it significantly as the years go by," says the German firm, which also notes John Bogle's theory: invest in fixed income the same percentage as your age ( a 25-year-old person, therefore, should invest 25% of the excess savings in bonds).

Learning and investing in an account

There are accounts to strengthen the investment habit among minors. The Young Openbank Savings Account is one of the options to take the first steps: it offers a fixed return of 0.15% APR from the first euro deposited, ensuring a small interest from the beginning.

The MyInvestor Junior Account gives a small remuneration for savings: the first year the interest it generates is 1% (up to 15,000 euros). It allows children to invest in the entire portfolio of the entity, just like adults. It also allows you to make contributions of money to funds automatically, but always under the supervision of the elderly and with advice.

There are other roboadvisors (automated managers), such as the ones you can consult at Finect, which introduce young people to investing. This is the case of Indexa Capital and its portfolio of funds for minors. It requires a minimum of 3,000 euros and the only holder is the minor, although one of the parents acts as legal representative. This product is designed to start investing for adolescents with a view to creating savings for studies after school.