Malta’s birth bonus is a step forward. Here are the steps that should follow

With a general election called for May 30, Malta’s two main parties are putting their cards on the table.

One of the Labour Party’s opening proposals is a €5,000 birth bonus for every child born in Malta, a significant increase from the current system, which pays between €1,000 and €2,000 depending on birth order.

It is a bold and welcome commitment and I want to say clearly that I think the intention behind it is right.

Malta recorded a fertility rate of just 1.01 live births per woman in 2024, the lowest in the European Union. This is down from 2.02 in 1990, the last time the Maltese population was at replacement level.

The consequences of this are a shrinking tax-paying workforce, an ageing population  and growing pressure on pensions and public services that will be felt deeply by the generation we are raising today.

Raising a child in Malta is expensive. From pregnancy costs and paediatrician fees to childcare, therapy and education, the financial weight on young families is considerable. It also begins long before the child is old enough to walk.

A more generous birth bonus mitigates some of that short-term pressure and, for that reason, I welcome it.

The evidence, however, suggests that financial incentives alone have not been sufficient to reverse this trend. We have increased bonuses, allowances and grants over the years and the birth rate has continued to fall.

That suggests that the barriers to having children in Malta extend beyond the financial. The cost of housing, the demands of two working parents, the lack of flexible working arrangements, the pace of life on an increasingly congested island and a lack of green open spaces are all part of a picture that a cash payment at birth cannot fully address.

I believe we need a broader conversation about the kind of country we want to raise children in, not just about what we hand families when a child arrives.

That said, we do have a real opportunity here to make this money work far harder than it currently does. And that is what I want to focus on. The question should not only be how much we give but also how we give it.

Last year, I had proposed that every child born in Malta would receive a €5,000 portfolio of diversified ETFs or passive funds at birth, which would remain invested until the age of 25.

Before selecting from an approved list, parents would first complete an investing literacy course by unaffiliated, qualified investing educators, after which they would be given the option to invest across an array of asset classes. The funds would then remain untouched until the child reaches adulthood.

The mathematics are straightforward. At an 8% average annual growth, €5,000 would be worth approximately €37,000 by the time the child turns 25.

Malta property prices have increased at an average of around 7% per year over the past four decades. That €37,000 could go some way towards funding a deposit on a first home at a time when ownership is increasingly out of reach for young Maltese.

I know this requires something most financial conversations in Malta struggle with: a long-term perspective.

We are not used to thinking in decades when it comes to public policy and this is what such a proposal aims to address.

Raising a child in Malta is expensive

The children born under this scheme will be entering adulthood at a time when the habits of saving and investing will be more important than ever. Giving them a head start, and giving their parents the education to understand why it matters, is one of the most meaningful gifts anyone could give.

The PN proposed a ‘Child Trust Fund’ in November that would see an initial capital endowment of €5,000 invested at birth, with parents and guardians given the option of making further voluntary contributions.

The money would be ring-fenced until the child reaches 20 and would then be accessible for education, property purchase or entrepreneurship.

My proposal takes that logic one step further: the funds will grow at the parents’ choosing, across a range of investments, with parents empowered through education to make informed decisions from day one.

This is not an entirely novel idea. Countries such as Sweden and the UK have implemented similar proposals to great success.

Swedish households have among the highest levels of capital market participation in Europe and Stockholm has produced more unicorns per capita than London, New York or Los Angeles.

The UK has a stock market participation rate of 33%, the highest in Europe. These are the product of cultures where people understand investing, engage with it early and are encouraged to participate.

There is also a benefit here that rarely features in the policy discussion and I think it deserves more attention.

The parents who complete an investing literacy course before selecting a fund do not simply “set it and forget it”.

They return home and apply those principles to their own finances. The policy would, in effect, be educating a generation of adults as a direct consequence of supporting their children. That is a remarkable return on investment.

Malta has the political will, the financial means and the global precedent to do something genuinely transformative.

Both parties have identified the right number. Now let us do something ambitious with it.

A child born in Malta this year could turn a government gift into a deposit, a business, or simply a future worth looking forward to. That is no small feat.

For a country with the lowest birth rate in Europe, giving our youth a genuine reason to believe in what lies ahead may be the most important investment we ever make.

Patrick DeBattista is a financial coach and lecturer.