Have you ever thought about investing for your children?

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Most Belgians opt for a savings account to give their children a good start in life. Of the families who set aside money for their children, 22% opt for a physical piggy bank and 68% for a savings account. The remaining 10% invests money for their children.

A traditional savings account is therefore still the most popular choice. It’s easy and safe. Savings are protected up to 100,000 euros per person per bank. The return on savings is also relatively predictable. The major disadvantage? Returns are low and don't begin to cover the rising cost of living.

Building assets

However, it is possible to achieve a higher potential return – if you’re willing to take a little more risk, that is. In principle, you can take that risk, because building that little extra for your children is a long-term endeavour. Investing in the long term gives your assets time to grow and recover from any temporary dips when necessary.

Do you want to help fund the purchase of a home later? Or do you want to help pay for your children to travel before they start their career? Whatever your children’s dreams are, one of the easiest ways to build assets for them is a regular investment plan.

How do regular investments work?

In a regular investment plan, you pay an amount into a selection of investment funds every month or quarter. A fund of this kind is usually a basket of shares and/or bonds managed by an investment expert. Investing in a fund spreads your risks. You invest in a wide range of shares and/or bonds rather than in a single share or bond directly. This means the disappointing performance of one share or bond is often compensated by the improved performance of other shares or bonds. At Keytrade Bank, you can choose from dozens of investment funds or you can simply indicate one of the three investment styles.

Flexible investments

Another interesting feature of such an investment plan is its flexibility. You can easily stop making deposits for a few months if things are not convenient at that time. You could also do the opposite. You can always make an extra deposit, for example on New Year’s Eve or for your child’s birthday. Finally, this type of investment is also very accessible: you can invest a sum as little as 25 euros per year. What's more, you don't pay any entry fees (with Keytrade Bank in any case). If you know how much you want to invest regularly, at what frequency and based on what investment style, there is one more important question left to ask yourself: in whose name do you open the account?

1. Investment plan in the child's name

• Your child owns the investments

• Your child chooses what to do with the investments when they come of age

> Advantage

A major advantage of an investment plan in your child's name is that your son or daughter generally does not have to pay any inheritance tax in the event of your death. In principle, this is because the tax authorities can consider any transfer to your child's investment plan as an indirect donation. If you don't register this gift – and you don't pay the gift tax of 3% in the Flemish Region and 3.3% in the Walloon Region – there is a chance that your child may still have to pay inheritance tax. This is the case if you die within three years of the transfer in Flemish Region and within five years in the Walloon Region and the Brussels-Capital Region. A new three-year or five-year period therefore starts for each new deposit in the plan.

> Disadvantages

The list of disadvantages is longer than the list of advantages. First, not every bank or trading platform allows you to open a regular investment plan in the name of a minor (Keytrade Bank does have this option). Second, you lose all control over the money. And third, you cannot invest the money in any way you see fit. Money from a child’s account can only be used as a defensive investment. For dynamic investments (with a higher potential return), an authorisation of the justice of the peace is required. This is why it is best to open an investment plan in the child's name, but to make the deposits from your own account. If you were to die before your child comes of age, the amount will be frozen until the child is no longer a minor.

2. Investment plan in the name of parent(s) or guardian(s)

• You own the investments

• You choose when you transfer the money to your child

> Advantages

First and foremost, you retain full control. This means you are free to decide how, when and in what you invest, without the restrictions applicable to accounts held in the name of minors. This allows you to choose a more dynamic investment strategy with a higher potential return. You also retain all flexibility. You can decide to withdraw (part of) the accumulated assets or adjust the plan at any time. In other words, you are not obliged to give it to your child.

> Disadvantage

Because the investments are in your account, they are also regarded as being part of your estate. In the event of your death, your heirs will generally be subjected to inheritance tax. Of course, you can gift your investments, but you will have to consider whether or not to take the risk of not paying the gift tax (see above).


3. Investment plan in the name of the parent(s)/guardian(s) with a designated beneficiary

• You own the investments

• You choose a specific age at which you transfer the money to your child (from age 18)

> Advantages

An investment plan with a designated beneficiary offers a combination of control and future security for both you and your child. If you designate a beneficiary, you can set a specific age at which your child gains access to the portfolio. Until then, you retain full control over your investments: you can make decisions about the investment strategy, adjust the investment or even withdraw all your invested capital. If you designate a specific beneficiary, the assets will be transferred to them at a time of your choice. The beneficiary doesn't need to know that a regular investment plan has been created until you let them know.

> Disadvantages

The investments remain in your account until the beneficiary clause takes effect. They also remain in your estate until then. If you were to die before the date of the transfer, the amount is frozen and put in the name of the beneficiary for as long as they are still a minor. As soon as the child comes of age, they will have access to it. The amount under the regular investment plan is allocated to the child when they come of age. It is not possible to add a beneficiary to a regular investment plan of joint account holders. If you want to draw up a beneficiary clause for several children, you have to open a separate investment plan for each child.

Do you want to give your children a head start in life?

Start regular investments today

This article does not contain any investment advice or recommendation, nor a financial analysis. Nothing in this article may be construed as information with a contractual value of any sort whatsoever. This article is intended for information only and does not constitute in any way a commercialization of financial products. Keytrade Bank cannot be held liable for any decision made based on the information contained in this article, nor for its use by third parties. Every investment entails risks such as a possible loss of capital. Before investing in financial instruments, please inform yourself properly and read carefully the document "Overview of the principal characteristics and risks of financial instruments" that you can find in the Document centre.

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