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CHF 200 child’s allowance: a smart investment for the future

In Switzerland, parents receive CHF 200 per month as child allowance for each child. Many view this money as a welcome support to cover ongoing expenses, from clothing to school supplies and leisure activities. But what if you saw this money as a long-term investment in your child’s future?

Imagine if, instead of just improving your child’s day-to-day life, these CHF 200 could shape their entire future—financial freedom, education, and security. This is possible if you invest the child allowance in a child, godparent, or godchild account. In this blog, we’ll explore why this might be one of the best decisions you can make for your child.

The Value of Early Investment

There’s an old saying: “The best time to plant a tree was 20 years ago. The second best time is now.” The same goes for investing. The earlier you start, the more time your money has to grow through the power of compound interest. By investing CHF 200 per month in the stock market or a well-diversified fund, your child could have a significant nest egg by the time they turn 20—a starting capital that sets them up for a self-determined life.

Let’s assume you invest the CHF 200 monthly into a fund that yields an average annual return of 7%. After 20 years, your child would have approximately CHF 102,000—just by investing the child allowance! This amount could be used for a solid education, a car, or as a down payment for a home.

Source: arvy, investment calculator

A Gift with Double Benefits

A child, godparent, or godchild account offers more than just financial benefits. It also provides a wonderful opportunity to teach your child the value of money and an understanding of investments from an early age. Imagine your child, at 15 or 16 years old, looking at their account statement and seeing how their money has grown. The feeling of owning a small part of the global economy can be incredibly motivating and educational.

Giving your child a “read-only” login to the account could allow them to track investments and see how markets function. Together, you can discuss developments, make decisions, and thereby strengthen their understanding of economic relationships and the importance of saving and investing. This is a valuable lesson, rarely taught in schools.

Financial Independence Through Foresight

In a world where financial security is increasingly important, it’s crucial to plan early. By regularly investing the child allowance, you lay the foundation for your child’s financial independence. Imagine your child, at 20 years old, already having a portfolio worth CHF 102,000. What a sense of freedom that would give them!

This financial foundation could empower your child to make confident decisions—whether it’s pursuing further education, traveling the world, or even starting their own business. By investing now, you’re not just giving your child money; you’re giving them the freedom to pursue their dreams.

The Power of Compound Interest

Another significant advantage of early investment is the effect of compound interest. Compound interest occurs when the interest earned on your investment is reinvested, thus earning interest on interest. Over time, this leads to exponential growth in your investment.

Let’s revisit the example of investing CHF 200 per month with an average return of 7%. After 10 years, you would have accumulated CHF 34,404. But after another 10 years (a total of 20 years), you would have almost tripled that amount to CHF 102,000. This demonstrates the power of compound interest—the longer the money remains invested, the more the wealth grows.

Source: arvy, investment calculator

What If You Don’t Invest?

It’s also important to consider what happens if you don’t invest the money. Of course, you could use the child allowance to cover daily expenses, which is entirely reasonable. But that money would then be spent and gone.

By investing it, however, you turn this monthly amount into growing wealth. In a time where living costs are steadily rising and state pensions might not be enough, this early investment could make a crucial difference.

A Legacy That Lasts

By investing the child allowance in a child, godparent, or godchild account, you’re not just creating short-term benefits, but laying the foundation for a legacy that can last generations. You’re giving your child not only the chance to have a significant sum of money at 20, but also the knowledge and skills to grow that wealth further.

Who knows—your child, inspired by your example, might one day do the same for their own children. In this way, you’re creating not just financial wealth but also a tradition of financial education and responsibility that extends far beyond your own lifetime.

arvy’s takeaway

Investing the child allowance in a child, godparent, or godchild account is one of the best decisions you can make for your child’s future. It allows for the accumulation of significant wealth while imparting crucial lessons in financial literacy and responsibility. By starting early, you give your child the most valuable gift: the freedom to pursue their dreams without financial constraints.

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