Do you want to invest your savings thoughtfully? Find out how to invest your money when you’re young.
When you are young, it is rare to hear about investment or placement. However, even if your contribution is low, this is an ideal time to invest wisely and start growing your savings. So how do you invest your money when you’re young? Which investments to turn to? We tell you everything.
Bankbooks adapted to young people
Banks offer advantages to young people by allowing them to open passbooks adapted to their age. No opening, closing or management fees. The booklets are completely free, and allow you to save money without taking the slightest risk, even if you have low incomes.
On the bank books, the money is available at any time. The disadvantage is the low profitability offered by this type of investment. In general, the livret A offers a rate of 0.75%, and the livret Jeune a rate that fluctuates between 0.75 and 2%, but whose savings are capped at €1,600.
Bankbooks are actually an interesting way to learn about saving, getting into the habit of investing money regularly.
Invest in an ELP
For your future real estate purchases , investing in a PEL can be interesting. Capped at €61,200, the PEL is suitable for young people who wish to set aside monthly, over a period of 4 to 15 years, to invest in a real estate project.
A PEL yields about 1% gross: the money you invest in it must not be withdrawn before 4 years, otherwise the account will be closed. However, the PEL allows you to benefit from an important advantage: you can take advantage of a preferential mortgage rate .
Life insurance is suitable for young working people who wish to grow their savings in the short, medium or long term. Indeed, contrary to popular belief, the money that is placed on a life insurance contract is never blocked. It is not necessary to wait 8 years in order to release the funds from the contract. In addition, this investment allows you to benefit from advantageous taxation, and a higher return than PEL and bank books.
Where to put money on life insurance
Thanks to life insurance , you have the possibility of investing part of your sum of money in several supports such as:
- Funds in euros with guaranteed capital
- The units of account
- Real estate funds (SCPI, SCI or OPCI type)
- Trackers (ETFs)
As you will have understood, it is possible to invest in the support of your choice, according to your investment horizons and your short or medium-term needs. To invest your money when you are young, life insurance is essential.
Rental real estate
Loan rates for young people are often attractive, and allow them to invest in real estate at lower cost. In addition, thanks to the leverage effect , it is possible for young people to invest in real estate even with a low contribution. Thanks to this financial system, it is possible to buy a property at €100,000, by contributing €10,000 and going into debt for €90,000. By renting your property, the monthly installments of the credit are reimbursed by the payment of the rents. You then don’t have to shell out money each month by dipping into your personal savings.
The profitability of rental real estate
For rental real estate to pay off, several calculations must be made upstream:
- You must calculate your cash flow: it is calculated by subtracting the charges (monthly loan payments, borrower’s insurance, co-ownership charges, property tax, PNO insurance, etc.) from the income, ie the rent;
- You must calculate your rental profitability net of charges: it allows you to make a secure investment, and is calculated by taking into consideration the sale price, the amount of the rents, but also the condominium charges, the management fees, the tax land, and home insurance. To calculate the net profitability, you will also need to include the taxation related to your project.
The funds needed to invest in rental property
If you wish to invest in rental property , a few thousand euros will however be necessary in order to be able to reassure the bank. It’s a great way to invest your money for the long term. Gradually, thanks to the real estate leverage effect, the objective is then to build and develop its real estate assets in order to ensure an annuity. The earlier you invest, the faster your investments will pay off!
The tools to calculate a good that pays
In order to carry out all the necessary calculations, and opt for a profitable property, several tools will accompany you in your project:
- The rental tensiometer: it allows you to have a clear idea of the state of the rental market in a given city. It allows you to analyze whether the rental demand is greater than the supply, and whether it will be easier for you to find a tenant, or whether, on the contrary, you risk having to deal with the rental vacancy. This tool also allows you to know if the tenants’ budget is balanced given the rents requested in the city. This will help you know if it will be easy for you to find a creditworthy tenant. To invest in the right place, and to offer an amount of rent adapted to the resources of the tenants, the rental tensiometer is essential.
- Online simulators: they help you calculate your rental profitability, but also to get an idea of the amount of monthly payments to be repaid, the duration of the loan, etc. To compare several projects with each other, and make the right decisions, investment simulators rentals are essential.
To invest in real estate, you can also turn to SCPIs (Société Civile de Placement Immobilier). These companies allow you to invest in real estate by freeing you from the constraints linked to management, maintenance and the costs involved in buying an apartment or a house to rent it out.
Thanks to this system, you buy the shares of a real estate heritage, and not the property directly. You can thus invest in real estate without having to invest too large sums. You then receive the amount of rent that corresponds to the shares you bought, and benefit from the capital gain on resale. Investing in SCPIs makes rental real estate accessible to everyone.
Online rental property investment platforms like Bricks allow you to buy shares from €10. To invest your money when you are young , this is a strategy that deserves to be exploited!