How to Invest Your Money When You Are Young? – Full Guide
Youth often rhymes with recklessness, yet this is the best time to think about preparing for your future. Indeed, the ideal is always to invest and save as soon as possible. But what is the point of investing in young? And what are the most advantageous investments when you are young? How to invest your money when you are young?
In this article, we will reveal all the good reasons to invest young. You will also discover the best investment ideas that will allow you to prepare for your future very early on.
What is the Point of Investing in Young?
First, investing young will make you earn more money. The longer a person holds investments, the more their investments will yield. If we only refer to real estate, 60 years’ rent will always be better than 30 years’ rent. The ideal is therefore to always invest as early as possible.
Second, investing young allows you to protect your money from inflation. Keep in mind that money loses value over time. And this loss of value accelerates with inflation. This means that if today you can buy three baguettes for 5 euros, it will be different later. In a few years, 5 euros will only allow you to buy two baguettes of bread or even one. By investing young, you will therefore be able to acquire properties at prices that are more accessible than they will be in the coming years.
Finally, investing young is a godsend for working less, earning more money, and anticipating your retirement. In other words, you will have the opportunity to retire earlier. Indeed, the younger you start investing, the greater the annuities from your investments. In addition, if you have applied for a loan, you will be more likely to repay it sooner by investing young.
In addition to these three advantages, know that by choosing to invest young, you will benefit more from your time. Something that becomes more complicated once you are married or have children. For lack of time, it will be more difficult for you to invest while combining employment and family life.
Invest in bank books or a PEL
Thanks to the advantages offered by banks, young people have the opportunity to invest early. These advantages translate into the possibility of opening booklets adapted to their age. Added to this are very flexible conditions since no opening, management, or closing fees are required and there is no taxation. Completely free, bank books allow young people to save without the slightest risk, even with very low incomes. Several choices of bankbooks are available to you.
The youth book
Available in all banking establishments, it is aimed at young people between the ages of 12 and 25. These young people must usually reside either in metropolitan France or in an overseas department. As the operation of the youth booklet is strictly regulated by law, a person can only have one booklet. However, the young booklet can be combined with other savings books such as booklet A.
Open to any adult or minor, the livret A is a remunerated investment (low, 2% since August 1, 2022). The opening of booklet A is done by signing a contract with a banking establishment. The sums paid into the account earn you interest every fortnight. The maximum payment is capped at 22,950 euros.
The Sustainable and Solidarity Development Booklet (LDDS)
It is a regulated savings account intended to finance SMEs. It also aims to financially support the social and solidarity economy. In addition, it allows the account holder to make donations. This is for the benefit of one or more companies in the sector of sustainable development and solidarity. With this account, the holder can make withdrawals at any time. A minimum deposit of 10 euros is required when opening the account. With the LDDS, the payment ceiling is 12,000 euros.
The People’s Savings booklet or LEP
The LEP is secure savings accessible to young people wishing to invest and make a profit. For its opening, it requires a minimum deposit of 30 euros. This savings account has many advantages: unlimited duration, withdrawal possible at any time, and zero fees… It also generates interest for you every fortnight. Interest is fully exempt from taxes and social security contributions. The payment ceiling for the LEP is 7,700 euros.
Investing in a PEL is an interesting investment idea for young people wishing to invest early. It is particularly advantageous if you are planning future real estate purchases. It is suitable for young people wishing to save monthly over a period of 4 to 15 years, with a view to a real estate project. The PEL generates an interest of approximately 1% gross. However, the money paid into your account must not be withdrawn for 4 years to avoid any account closure. In addition to the interest generated by your payments, with the PEL, you will be entitled to a preferential mortgage rate.
Invest in Life Insurance
Life insurance remains an investment choice suitable for young workers wishing to develop their savings in the short, medium, or long term. Contrary to what is often said, the money saved on a life insurance contract is not blocked. The life insurance holder also does not have to wait 8 years to release the funds from his contract. In addition, life insurance benefits from advantageous taxation. This type of contract can make it possible to hope for a higher return than that of the PEL and other bank savings accounts, but there will be more risks.
With Life Insurance After 70, you have several choices of medium to place your life insurance:
- Units of account: shares, ETFs, SCPIs, SCIs, SICAVs, bonds, etc.
- Funds in euros: fully or partially guaranteed capital.
Invest in the Stock Market
Some stock market investments are accessible even to teenagers, but they must wait until they are 18 before they can invest. To invest in the stock market with a minimal budget while being young, you have two options. Either opt for a PEA, including the Young PEA or opt for the securities account (CTO).
Open a Youth PEA
The PEA Jeune is an investment granted to young people between the ages of 18 and 25, who are fiscally attached to their parents. The investment ceiling for this investment is limited to 20,000 euros, unlike the normal PEA which is 150,000 euros. As soon as the young adult becomes fiscally independent, his account will be transformed into a normal PEA. On the taxation side, the 30% flat tax will apply over a period of 5 years. Beyond this period, taxation at a rate of 17.2% will apply.
Investing in the young stock market with the securities account
Opening a securities account (CTO) allows young people who are still minors to invest in the stock market. To open an account, you have the choice between two possibilities:
- Either ask for the agreement of one of your parents to be able to open a CTO. With the authorization of one of your parents, you can open a CTO from the age of 16. As a result, you will obtain legal authorization allowing you to invest in the stock market;
- Either open a CTO in the name of one of your parents.
In both cases, the authorization of one of your parents is essential as long as you are a minor. Otherwise, you can also wait until you are of legal age to start investing in the stock market.
Invest in Real Estate
Investing in real estate while being a young asset is an excellent investment idea. However, for your investment to be profitable, you must choose the right investment. To be an annuitant, for example, owning your own principal residence will not be enough.
For a more lucrative investment, investing in an SCPI or embarking on a rental investment, starting with car parks, for example, maybe more interesting.
Invest in SCPI (Civil Real Estate Investment Company)
SCPIs make it possible to invest in real estate without the usual constraints associated with the purchase or rental of real estate. In fact, the purchase and rental of a house are often accompanied by constraints related to management, maintenance, or operating costs. With SCP, you are free from all that.
In the investment in SCPI, you do not buy the property directly but the shares of a real estate heritage. You can also benefit from a real estate investment without having to invest large sums of money. Your advantages? You regularly receive an amount of rent proportional to your units. You also benefit from the added value in the event of resale. The investment in SCPI gives the opportunity even to young working people with a small budget to launch out in real estate with income.
Get started in rental investment
Young people generally benefit from attractive loan rates. If you are young, you can take advantage of this opportunity to invest in stone at a lower cost. In addition, thanks to the leverage effect, a young person can invest in real estate despite a low contribution. Suppose you buy a property at 100,000 euros. With this financial system, you can acquire this property by contributing 10,000 euros. The remaining 90,000 euros can be paid by means of a bank loan. If you choose to rent out your property, the rent collected will allow you to repay the monthly payments of your loan. This saves you from repaying your credit with your personal savings.
In addition, rental investment protects you from inflation since you can revalue your rent each year. To start, we recommend that you focus on high-yielding investments. In particular the purchase of real estate such as a garage, for example. With this type of real estate purchase, you can expect a gross return of up to 8%, or even more.