As a student or young worker, it is sometimes rare to hear about saving and investing money in your circle of friends.
It doesn’t mean that the investment is simply reserved for people who are already well-established in professional life.
Even if your contribution is minimal, several solutions exist so that you can invest your money and thus build up solid savings for the future.
The heritage experts share their advice for investing when you are a young (active) person.
Invest in bank books, suitable for young people
Without opening, closing, and management fees, bank books have strong advantages for saving money without risk, even with low income. The money invested is available at any time.
However, the lack of risk of these investments is offset by the low profitability of the bank books: The A booklet has stagnated at a rate of 0.75% since 2015 but could rise to 1% on August 1, 2017, and the Young booklet fluctuates between 0.75% and 2% but remains capped at 1,600 euros. These investments have the advantage of not being taxed.
The bank books are positioned as a very good opportunity to familiarize yourself with the fact of saving regularly from an early age. Short-term savings are available but not very remunerated.
Invest in an ELP for a future real estate purchase
With an entry ticket at 225 euros and minimum payments of 45 euros per month, the PEL (Housing Savings Plan) is suitable for young people who wish to set aside monthly, over a period of 4 to 15 years, to then save and invest in a real estate project.
After three significant drops in its interest rate between 2015 and 2016, the PEL is now less remunerative than certain bank books: For any account opened in 2017, it earns only 1% gross before the puncture of social security contributions by banks.
Please note: The ELP is capped at € 61,200 (excluding capitalized interest) and any withdrawal before 4 years results in the termination of the ELP.
Why subscribe to an ELP?
Despite its unattractive rate of remuneration, the ELP has a major advantage: that of being able to benefit from a preferential mortgage rate of 2.20% for a maximum amount of 92,000 euros.
A rate fixed in advance is ideal for young working people who acquire their first apartment or house. Obviously, the future owner will have to check if this proposed rate is more flattering than that of the lending bank.
Investing in real estate via SCPIs
Do you want to invest in paper stone by overcoming the constraints linked to management, maintenance, and especially the costs involved in buying an apartment or a house?
The SCPIs (Civil Companies for Real Estate Placement) make it possible to acquire shares of a real estate heritage without having to invest too large sums. The posted rates of return were on average + 4.7% net of management fees (but before tax) in 2016.
Investing in SCPI is envisaged over the long term. The capital is not guaranteed, in the case of a real estate investment.
Investing in life insurance, the essential investment
Acclaimed by the majority of people, life insurance is suitable for young workers who want to grow their savings in the short, medium, or long term while benefiting from advantageous taxation. This is reflected after 4 years of ownership and choice of the option for the fixed-rate deduction.
Contrary to popular belief, money on a life insurance contract is never blocked. It is not necessary to wait 8 years to get the funds out of the contract.
If you don’t have the knowledge or the time to take care of your contract, do not hesitate to seek assistance or opt for managed management (under mandate).
Life insurance is therefore the investment to hold for a young person: Availability of money at any time, the possibility of investing in the medium of his choice according to his investment horizon and his short or medium-term needs, and yield higher than booklets or PEL.
No matter what choice you make, it happens to be recommended that you open a life insurance policy as soon as possible to make a date. Taxation linked to the contract starts at the time of the opening date and not at the time of the date of each additional payment.
In conclusion, which investments to favor when you are young?
There are many possibilities for investing when you are young, the challenge is to know how much you want to invest, in what perspective, with short, medium, or long-term compensation, and with what risks incurred.
Getting started is also getting started, studying, learning, learning, and therefore having a financial culture. You have to get out of everything without risk and open up to investments like life insurance or PEA or paper real estate for example.