[Insight & Opinion] Let's Create Tax-Free Investment Accounts for the Young Generation

When a 2030 generation employee joins my department, I habitually print out the past 90 years of the U.S. S&P 500 index graph and hand it to them, saying, "Put this graph on your desk and practice looking at it whenever you want to sell your stocks and hold back. When I was in my twenties, even if I read in investment textbooks that the S&P 500 index had good long-term performance, there was no practical way to invest unless you lived in the U.S. But now, that is no longer the case. You must train yourself to endure stock price volatility." Although this is the talk of a fifty-something old-timer, I mean it sincerely.

There is no need to add much here about the difficulties faced by the younger generation. The low birthrate problem is likely due to economic uncertainty. It goes without saying that the younger generation should be able to accumulate assets over the long term. The problem lies in the method. The government mainly encourages asset accumulation among the younger generation by providing incentives for savings products. For example, if you join products like the Youth Leap Account and deposit a certain amount, they match it and guarantee a certain return. The high interest rates are certainly attractive. However, it is common knowledge that long-term asset accumulation is not possible by savings alone. Even if the current era is high interest rate, it is not as high as when the current older generation was young. Before the 2000s, high interest rates were common. Just putting money in deposits with over 10% annual interest could double assets in about 5 to 7 years. But now, that is impossible.

Moreover, apartment prices in large cities near workplaces, preferred by young people, are truly out of reach. Saving enough to buy an apartment in a big city is nearly impossible for most young people. Realistically, it is difficult to find other ways than accumulating investment assets like stocks over the long term. Despite this situation, government support measures still focus on savings products. Will the government just take money out of its pocket again when maturity comes? Considering the important variable of aging alone, it is unlikely that government finances will improve, so there is a limit to the government continuously handing out money like pocket change.

Even now, it is necessary to move away from savings product-centered support measures and provide incentives for investment assets as well. Up to a certain amount, full tax exemption should be allowed, and investments should be made in various domestic and international assets suitable for the global era. In an era where people use Apple products, search with Google, and watch YouTube, tax incentives that only induce investment in domestic products are too narrow and do not match the sensibilities of the 2030 generation. The 2030 generation is already actively investing in stocks and exchange-traded funds (ETFs) from countries like the U.S., China, and Japan. It is essential to consider that they are the most globalized generation in modern Korean history. For reference, Japan allows investment in both domestic and foreign stocks through the Nippon Individual Savings Account (NISA), which is tax-exempt for small investments, excluding speculative investments such as derivatives.

Some express concern about the younger generation’s attitude of trying to make money through investment, but this is an outdated view. Without investment, innovation does not occur, and the main agents of innovation are none other than the 2030 generation. Looking at the history of Silicon Valley in the U.S., the emergence of venture capital and innovative companies are two sides of the same coin. Accumulating wealth through capital markets has more positive functions both personally and socially.

Lee Sang-geon, Head of Mirae Asset Investment and Pension Center

This content was produced with the assistance of AI translation services.