All children in Romania have open treasury accounts. Although the program “GROwth – Junior Centenary Individual Savings Account” has been officially active since 2019 (through GEO 104/2018), few parents use it (approximately 2% of children in Romania had money last year, for example, and because the promotion was not, most likely the situation has not changed much).

*The text is not an investment recommendation

Many continue to simply put money in banks in savings accounts with very low interest, although it may be better to use revolving deposits or a combination of several products. That is, create a small portfolio.

Returning to the growth program, HotNews.ro reminds those who forgot that the 600 lei state bonus is not much time left.

For those who are not familiar with the program, for 1,200 lei contributed annually, the state receives 600 lei. In addition, 3% interest (without 600) is added to the initial balance.

A child can access money after reaching 18 years of age.

In 18 years, this would mean almost 35,300 lei (using compound interest) and taking into account that 600 lei in the balance is not calculated.

Those who save more than 1,200 lei for children should think about other types of products. Because only 3% on the balance is not enough. Those who do, in principle contribute only 1,200 lei thanks to an allowance of 600 lei, and the rest in deposits, government securities or investment funds.

Bank savings accounts have relatively low interest rates

Banks’ offer of savings accounts (for children) is not very good. Never was. This is not news.

The effective interest rate is 1.3 – 4.7% per annum. There is no point in doing more calculations.

Warehouses would be a better idea. The interest rates there have always been higher, now they are 6.8-9% (and 2-8% per annum), depending on the bank. At 1200 lei, for example, after paying the commission and income tax, you will receive in a year: 42-97 lei.

Government securities, an alternative to deposits

There are also government securities through the Treasury or on the exchange (Fidelis). Theoretically, new issues of Fidelis in lei and euros should be launched in December. The prospectus hasn’t arrived yet, so we don’t know what the interest rates might be (the minimum Fidelis subscription is 5,000 lei or 1,000 euros, but they can be purchased later on the market “on a piece by piece basis”).

However, it seems that the Tezaur monthly program continues. In November, for example, interest is 8.7% for 1 year, and 9.15%/year for 2 years. Considering that this profit is not taxed, at 1,200 lei it would mean an increase of 104.4 lei – 219.6 lei (after two years). With what interest rates they will come, we will see in December.

We also have to look at inflation. BNR predicts inflation of 11.2% at the end of next year (in recent years it has not reached the forecast at all, and this figure should be taken with some reservations). So, in theory, the government should offer a better deal on government bonds.

For those who are more experienced, there is the capital market. There are many products, from mutual funds, ETFs, directly to companies or corporate bonds, but it’s not a good idea to jump into it if you don’t know how or don’t want to learn.

There are books that can teach you. Some of them we recently discussed in the “La Cafea” studio:

So, a better idea for those who can save more than 1,200 lei per year for children would be to go for growth (for premium 600 lei and 3%), and invest the excess in other types of products with higher returns, such as bank deposits, government securities or stock exchange products (for those with a slightly higher level of financial education).

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