As the holidays come to a close and life begins to go back to routine, it is time to start preparing for the future of the new generations in the house.
Building a savings plan for the future of your children or grandchildren through traditional financial products is almost impossible these days because of the low yields they offer. But with Housers you will find the perfect solution to building a savings plan and a better future for the new generations.
Define a Savings Plan for the Future
When we decide to invest in long-term investments, one of the main problems we face is inflation. In order for our investments to not lose purchasing power, they must have a higher return than inflation. For example, by saving money in the portfolio we are losing purchasing power whenever the value of inflation is positive. Contrary to the previous example, real assets tend to be an excellent protection against inflation: historically, inflation is one of the factors that influences (with a directly proportional relationship) the return on investment in real estate assets, for two reasons:
- Homeowners can increase the value of rent (renters can afford to increase rent)
- The price of real estate assets tends to rise with rising inflation.
With the recent financial crisis, central banks have tried to soften the crisis by injecting more money into the economy by printing currency (Federal Reserve, United States of America) or buying public or corporate debt assets (European Central Bank). This injection facilitated access to money (less capital shortages), mainly through access to debt at very low interest rates.
As a consequence, reduced interest rates from an investor perspective provide lower returns on debt securities or bank deposits. In the medium/long-term these near zero interest rates (or negative in some cases) cause the investor to lose purchasing power in positive inflation situations.
Deposits are the financial product most used by those who wish to build a savings plan for the future, however, the yield they offer is very low or even zero. As seen in the following graphic, the benchmark interest rates (interest rates for operations between banks and the European Central Bank) have been in place since June 2012 at 0% and since June 2014 they have reached a negative position. The ECB benchmark interest rates influence the banks’ Euribor rates (interbank interest rates), which consequently define the amount to be paid to investors for their deposits, which is currently very close to zero.
Investing in real assets
Saving for the future is necessary these days, and doing so by investing in real estate assets is one of the most profitable alternatives, especially compared to other products like debt securities or bank deposits, where profitability lies in a historical minimum.
Real assets, such as real estate assets, are investments that can be seen and touched and have an intrinsic value (the value of products or assets in themselves such as a house where we can live in or a sweater that we can wear, etc.). Real estate or raw materials are examples of real assets with intrinsic value.
Investing in real estate assets is the right alternative for those looking to build a long-term savings plan with security and good returns. As we can see in the price index of the houses in the euro zone and the European Union, we are witnessing a great moment in the real estate market and the prospects are that prices will continue to rise. This development contrasts sharply with the evolution of ECB interest rates and with interest rates on deposits.
Saving with Housers
When the objective is to guarantee and offer a better future to the new generations of the family, it is fundamental to invest in assets that help us maintain purchasing power at 15, 20 or 25 years and investing in the real estate market is the right alternative.
Access our open investment opportunities here, and discover what Housers can do for your children’s future.