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  • Your Baby’s First Financial Steps

    How should you invest the money your child will receive this holiday season?
    by Katrina Tan .
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    B. Long Term Accounts  

    As your child’s savings enter into the thousands, you may want to consider upgrading to an account with longer terms and higher interest earnings, such as time deposits, insurance, stocks, and the like. These accounts usually require a minimum of a few thousands to tens of thousands, and an investment period of 30 days to several years. It can earn much more than a savings account.

    “Time deposits give two to five percent per annum, while retail treasury bonds (RTB) issued by the government may earn five to eight percent per annum,” says Galarpe. “Mutual funds or Unit Investment Trust Funds (UITF) are pooled funds, where a fund manager decides which bond or stock to invest in.” 

    Aside from the promise of greater profits, long term accounts will also teach your child about the value of discipline, goal-setting, and not touching their savings in order to earn more in the long run. “The money accrued through the years can be used for your child’s college education, graduation gift, or as seed money for a future business,” says Esteban. 


    Children also have the option to invest in their own insurance, via Pioneer Insurance’s SparXx product. Dubbed as “this generation’s smarter version of the piggy bank,” SparXx allows kids to make bite-sized investments of anywhere from P300 to P5,000 at a time. Pioneer has even released a comic book, Private Iris, in collaboration with Blue Cow author Jamie Bautista and artist Arnold Arre. “It allows kids to read an engaging story, while also teaching them values, such as science, logic, and financial wellness,” explains Bautista. 

    Advantages: The opportunity to earn a higher return than a savings account, plus, the returns are guaranteed. The money is also diversified and professionally managed. “Just remember the number one rule in investment - the higher the interest or amount earned, the higher the risk,” says Tan. “And never invest in something you don’t fully understand, no matter how profitable it sounds.” 


    Disadvantages: The money is tied up, meaning you cannot withdraw for the specific term of the investment. The account may also come with management or handling fees, and you may experience a few losses during volatile times. “Ask your bank for financial advice that’s suited to the goals, risk appetite, and investment time horizon for your child,” says Galarpe. 


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