Forget plastic tat, give a gift that will last
Instead of giving children and grandchildren toys, choose a present that will help them out financially. Julian Knight offers a few ideas
Sunday 04 December 2011
So what are you planning on buying the child or grandchild in your life this Christmas?
A games console maybe? Well, what about something less here today gone tomorrow? A financial gift of cash, shares or even a prepayment card can help them in the future and even teach them a bit about how to handle their money. Here's a selection of financial gift ideas big and small for children.
One of the most popular and long-standing ways of saving for a child is National Savings premium bonds. The bonds instead of paying interest offer the chance to win a range of prizes from £50 up to £1m. "The prize element makes premium bonds a lot of fun for children. They can check the monthly prize draw to see if they have won something," said Francis Klonowski, a certified financial planner and owner of Klonowski & Co IFA. "Overall, on average the returns compared to a higher interest savings account may not be that good, but you can win big and there is a real emotional attachment for the child. It can be a great way to start a child out on the world of saving."
Children's bonus bonds
National Savings again, this time a tax-free bond which runs for five years. Investments start at £25 up to £3,000. Capital is completely safe and interest is paid at the end of the term, but if the bond is cashed in early no interest is due. "On the plus side you get a set rate of interest so you know how much the bond will be worth in five years. However, the rate of 2.5 per cent is not a best buy account," Mr Klonowski said. And this is also well below the current rate of inflation. "At the present rate of inflation after five years your money will be worth about 15 per cent less than it is today. That's not a good starting point for a child's savings," said Jonathan Fry, director of IFA firm Jonathan Fry & Co.
Gold in any form has been a one-way street as far as investment growth is concerned in recent years, with the price of the most precious of metals more than doubling since the onset of the worst financial crisis. "Buying a child a gold sovereign or other gold coin has its appeals. It's a physical tangible gift rather than a scrap of paper or account book. We've also seen strong growth in this asset," Mr Fry said. However, costs to buy and sell gold coins are much higher and the strong growth performance of recent times may not continue. "You're looking at 5 per cent disappearing in buying and selling costs, and in the very long term gold and other commodities have been eclipsed by the stock market," Mr Fry added.
Launched with a whimper rather than a bang a month ago, junior individual savings accounts allow parents and grandparents to put £3,600 in cash or the stock market per year with returns paid free of tax. But to date there are only a handful of providers of JISAs, with many big banks putting plans to launch accounts on ice until the new year. One of these, the Buckinghamshire building society, says the tax break and other benefits of a JISA are not to be sniffed at. "Parents see a savings account as a great tool to financially educate their children," said Jill Carpenter, marketing manger Buckinghamshire Building Society. "They can come in with their own pocket money and see their balances grow. The big banks may not be bothering with JISAs because of the small balances involved but there are still a few accounts paying 3 per cent tax free."
Investment or unit trust
"Generally the longer you've got before the child will need the money, the more risk you can take with the hope of maximising returns," Mr Laird said. And when it comes to getting higher than inflation returns, a unit trust with low management charges is an option. "What clients of mine sometimes do is invest in a unit trust fund and have the account designated in the name of a child but tell the child when only they are responsible enough to manage the investment," Mr Laird said. As for choice of investment, Mr Klonowski prefers the global growth sector. "This has the benefit of diversifying the investment over the world economy rather than being country specific, reducing risk and hopefully providing steady returns," he said. However, for people with a shorter time frame – such as those gifting to a teenager – then a cash savings account maybe a safer bet.
Low-cost personal pension
You can save in a low-cost pension up to the value of £3,600 per year in the name of a child under 18. Contributions are free of tax and the pension can't be accessed until age 55. "It may not have the immediate emotional pull of a games console or a toy, but later in life the child will be hugely grateful for a massive boost to be had from a pension pot," said Mr Laird. "It will have a very long time in which to grow which means it could be worth a tidy sum." And a pension can be a handy inheritance tax saving tool. "Contributions can be made out of regular income which means that they're not liable to inheritance tax."
Prepaid credit card
Parents pay a credit on to a card which the child – over the age of 13 – can then use for spending and withdrawing cash. Parents keep control of the purse strings and prepayment cards have no credit facility. The child can learn budgeting skills while having access to ready cash. However, pre-payment cards from providers such as MasterCard, Maestro, Cashplus Gold and Clearcash do come with set-up, transaction and cash withdrawal fees.
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
Shock poll shows voters believe Ukip is to the left of the Tories
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
New era of cheap oil 'will destroy green revolution'
Ukip founder Alan Sked and Nigel Farage 'begged Enoch Powell to stand as a candidate'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
iJobs Money & Business
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...
£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens