Learning to save money is not only educational, it is also profitable. And a lot: when you come of age, in 18 years, returns can add up to almost half a euro for every euro set aside.
If you are late with last-minute gifts and don’t know what to give a boy, a child or a newborn baby? Don’t worry. You still have time to make a good impression using two instruments within your reach: time and (hopefully) some money. On the other hand, how many grandparents and uncles and uncles in the difficulty of interpreting the tastes of the youngest prepare these days the traditional envelope with a few tens of euros inside? I would say a lot. So let’s try to grow this idea, making sure to give a savings plan for Christmas and, consequently, some financial education.
Calculations in hand
Fear not, nothing particularly difficult but something extremely effective. Because, thanks to the ingredient you have considered less, time, satisfaction can be really interesting. And to ensure that, for example, a newborn child can obtain a 43% return on capital at the age of majority, thanks to this plan. Wait to call the anti-fraud task forces: here we do not want to talk about the amazing results promised by unscrupulous websites that aim to empty the pockets of the more or less unsuspecting apprentices online traders, but only some simple mathematical calculations. One hundred euros given every Christmas to a newborn child until the age of majority remains 1800 if set aside under the proverbial mattress, but can become 2587.37 if instead invested in a diversified instrument of managed savings.
Which one? Here is the point, but before focusing on it, it should be made clear that the rate used for the revaluation of invested capital is 2.43%, which is an average annual return significantly lower than the average 3.7% obtained by Italian pension funds in the last ten years. This is a not insignificant benchmark, given that many pension funds – those of the category, but also open-ended and Pips – offer the possibility of having dependent family members join and allow the contributions paid for children to be deducted for tax purposes, within the limit for the family of € 5164.57. Opportunities to be compared with the commercial proposals of the banks and the Post Office which, as is well known, offer many instruments of savings for the youngest, but not only for the interest of the latter: the costs, said in another way, can erode the returns in a significant way.
Saving is culturally important and doing so for their children is the motivation that drives 16% of Italians to set aside money; a share that rises to over 20% in the 45-54 age group. In order to make the best use of savings, it is important to use the right tool but also, as said, time: eighteen years is a sufficient time dynamic to go through some financial crisis and some stock market upsurge. But above all, by investing in instalments, through a capital accumulation plan, it is possible to reduce volatility and risks and collect interesting returns.
The educational function of savings
Of course, in the case illustrated here we have talked about modest figures: but you can add as many zeros as you want to those sums and in percentage terms the results do not change. The point is to be aware of the tools and objectives at stake and hence the educational importance of saving, i.e. the ability to plan one’s future using the resources available: small or large. For example, to know how to be satisfied: it is true that the clients of US financial advisors have earned an average return of 1.9% per annum over the last 20 years compared to a 6% per annum performance in listings: but allocating 100% of their portfolio to shares, for those who do not have an adequate risk profile, is certainly excessively risky.