Few people opt for this way of investing money, which turns out to be a winning strategy in the long term, according to a finance expert who explains, as a bonus, how not to pay taxes.
When you become a parent, you try as best you can to anticipate and put money aside to allow your children to start their adult lives on a good financial basis. This savings allows them to pay for their studies, to help them with life events (marriage, moving in or buying an apartment, etc.) or quite simply to support them in the event of financial difficulties. Today, many investments make it easy to save from birth until they reach the age of majority, such as the Livret A, the Housing Savings Account (CEL) or the Housing Savings Plan (PEL), the savings book banking, life insurance or even the future climate savings plan (PEAC).
But there are other ways to invest in your children’s future and few people use them. On his Tiktok account, @nicolas_finance advises parents on a specific investment, which allows them to put money aside over the long term, without paying taxes. He takes the example of a mother, Sophie, aged 34, who has just welcomed a child. “Rather than opening a low-yielding A savings account for her daughter, she opts for a much more profitable strategy”, namely a securities account that she opens as soon as her daughter is born. “It’s one of the simplest ways to invest in the stock market,” explains the finance expert. “It regularly invests in ETFs (diversified and stable securities), and with a time horizon of 18 years, the risk of loss is almost zero if it remains invested over the long term,” he explains. “On average, the stock market has a historical performance of +8% per year”recalls the specialist. Thus, at the rate of 200 euros invested each month, her daughter could receive nearly 100,000 euros when she reaches the age of majority, or a capital gain of 60,000 euros.
But be careful, this capital gain is taxed at 30%, which would amount to paying 18,000 euros in taxes. To avoid paying this amount to the tax administration, the expert gives a tip. To do this, Sophie would need to keep the Securities Account in her own name. When her daughter turns 18, she will then be able to transfer the entire investment in the form of a donation, and therefore without taxation. “When his daughter wants to resell Securities, only the capital gains made after the donation will be taxable,” explains Nicolas.
Remember that a securities account allows you to acquire a wide variety of securities such as shares, bonds, mutual fund shares, subscription warrants, ETFs (or trackers) as well as warrants. Check with your banking establishment and be aware that an account maintenance fee may be charged each year for administrative management as well as custody fees for the conservation of securities. Finally, you must also take into account market fluctuations which can cause your investment to vary.