The economist gave advice on how to create capital for a child
Conversations about investments often boil down to the question of where to invest money right now. However, when creating capital for a child, the approach changes: the main factor is not short-term profitability, but time. Olga Gogaladze, an economist and founder of the PRO.FINANSY school of financial literacy, told Izvestia on July 11 what tools can help form a financial cushion for an unborn child.
According to the expert, the sooner parents start saving money, the easier it will be to solve major financial problems in the future: to pay for education, help with the purchase of housing or create start-up capital for adulthood. At the same time, compound interest plays an important role: even small regular investments over the years can turn into a significant amount.
The relevance of such savings is growing against the background of an increase in the cost of education. Studying at a university today can cost a family more than a million rubles, and sought-after college courses also require serious expenses. Therefore, the pre-created capital allows you to reduce the financial burden in the future.
How to start forming a children's portfolio
The first step is to determine the purpose of savings. This may be tuition fees, a down payment on housing, or financial support for a child after adulthood.
The expert emphasizes that there is no universal strategy for all children. Everyone can have their own plans and deadlines: one child may dream of studying abroad, another may dream of going to work early. Therefore, it is better to form an investment portfolio for specific tasks.
At the same time, it is possible to introduce children to the basics of financial literacy from adolescence. From about the age of 12, a child can gradually be included in the discussion of goals, show how savings work and why parents choose certain tools.
"If we talk about instruments, then with a long horizon of 5-10 years or more, it is worth looking towards the investment market. Bank deposits usually perform worse in this strategy, as high interest rates on them do not last long," explains Olga Gogaladze.
Which tools are suitable for long-term savings
According to the expert, stocks and funds, including index funds, can become the basis of a long-term portfolio. They allow you to invest in a wide market at once and not choose individual companies on your own. Such instruments are suitable for a long period of time, as they provide an opportunity to achieve returns above inflation. At the same time, to reduce risks, you can add bonds to the portfolio, especially as you approach the moment when you need the money.
The main principle is simple: The longer it takes to reach the goal, the more opportunities there are to use tools with potentially high returns. The closer the deadline is, the more important it is to save the funds you have already accumulated.
How does the strategy change depending on the deadline
If the target is 10-15 years away, the portfolio may be more aggressive. During this period, stocks and funds can form the basis — their share sometimes reaches 70-80%. A long period of time allows you to survive temporary market declines.
With a 5-10-year horizon, the balance becomes more conservative. For example, about 60% of the portfolio can be occupied by stocks, and 40% by bonds. This structure allows us to maintain the growth potential and at the same time reduce risks.
If the goal is less than five years away, the priority changes: the main focus is on capital safety. In this case, the share of bonds increases, and a year before the intended target, the portfolio is usually transferred to the most stable instruments — bonds, liquidity funds or deposits.
Mistakes made by parents when investing for children
One of the common mistakes is to create a portfolio and never review it again. According to the expert, the strategy should change along with the deadlines.
Too cautious an approach at the start can lead to a loss of potential growth, and excessive risk in front of an important financial goal can jeopardize savings. It is optimal to check the portfolio structure approximately once every six months or a year.
Another mistake is not to take into account future price increases. It is important for parents to consider expenses adjusted for inflation: the cost of education or housing in 10-15 years will be significantly different from today's.
"There must be growth tools in the portfolio, primarily stocks. And it is better to calculate the goals themselves not at current prices, but taking into account how much the necessary service or asset may cost in the future," Gogaladze says.
Rebalancing is also important. If individual assets have grown and occupied too large a share of the portfolio, some of the funds can be redistributed into more stable instruments.
How to teach a child how to handle money
Financial literacy is formed not only through explanations, but also through practice. According to Olga Gogaladze, it is important for children to see how money works in real life. From the age of 10-12, you can tell your child about family savings, show simple examples of how investments work, and explain basic principles: why the value of assets may temporarily decrease and why to maintain a long-term approach.
Over time, a teenager can be involved in discussing financial decisions: for example, explaining why the share of bonds increases as the goal approaches, or why a decline in the value of stocks sometimes becomes an opportunity to buy.
Переведено сервисом «Яндекс Переводчик»
