Most likely, you have never considered investing your child’s benefit. The payment made to all parents regardless of income received by the Irish Government could be invested to enlarge it. Child Benefit, also known as children’s allowance, is a monthly payment to the parents or guardians of children under 16 years of age, You can get Child Benefit for children aged 16 and 17 if they are in full-time education or full-time training or have a disability and cannot support themselves. Child Benefit is €140 a month for each child.
One strategy can be to put the child’s benefit into a regular savings account in a bank or credit union but there is no interest earned on that money. It’s important to have some kind of return because of constantly escalating costs and living expenses.
By starting early and investing, you can take advantage of compound interest, or interest on interest, to see your investment increase over time. Long-term, this may lead to substantial growth. Investing in the benefit can help your child build a nest egg for their future, such as saving for their university.
If you invest €140 in a fund for 18 years you will have €30,240 saved up. Putting your money in a fund your savings can double. Instead of having only what you deposited €30,240 you may have €66,713. Investing in the child’s benefit can help protect against inflation, as investments have the potential to grow at a rate greater than the rate of inflation.
Regular Savings – you get exactly what you deposited
Total – regular savings
Investing in a fund – you get what you deposited plus growth
Obs: The rate of tax on growth and income from ‘Funds’ is 41%.
It’s important to keep in mind that all investments have some level of risk, so before making a choice seek advice from one of our financial advisors. We can help you weigh the benefits and risks and make an informed decision about your child’s education fund.