How you can make money a great gift for a child

Cash need not be a cop-out. It can be as thoughtful as any other present, says Stephen Spurdon

Giving money as a Christmas present to a child can seem a bit of a cop-out. But there are ways of making it more meaningful, imaginative even, depending on how you do it. A money gift can serve to help provide a nest egg for a child, as well as perhaps getting them more involved in thinking about savings and investment from an early age.

Giving money as a Christmas present to a child can seem a bit of a cop-out. But there are ways of making it more meaningful, imaginative even, depending on how you do it. A money gift can serve to help provide a nest egg for a child, as well as perhaps getting them more involved in thinking about savings and investment from an early age.

There is a range of products designed for children from banks and building societies, fund managers, friendly societies and National Savings & Investments (NS&I). It is even possible to start a Stakeholder pension for a child from birth, contributing up to £2,808 a year - which, with tax relief, adds up to £3,600 invested.

The Government's Child Trust Fund will be available from April 2005. This only applies to children born on or after 1 September 2002 and allows a tax-free investment of £1,200 a year up to the age of 18 on behalf of the child.

Banks and building societies offer child-specific savings accounts. Conditions vary according to the amount saved and the term. MoneyFacts' website (www.moneyfacts.co.uk) shows that the top-paying instant access accounts on 3 November 2004 were Alliance & Leicester's First Saver, paying 5.5 per cent AER from £1, and Halifax's Monthly Saver, paying 5.5 per cent AER from £5.

National Savings & Investments also offers the tax-free Children's Bonus Bond, on which it recently upped the limit to £3,000 an issue. Held in the name of the child, under the control of a parent or guardian until the child is 16, the bonds can be opened with as little as £25. The current issue pays 4.45 per cent compound interest when held for five years.

Ordinary and Investment accounts from NS&I can be opened for a child from birth at the Post Office. They pay out gross and the liability to tax is on the child's annual allowance only. The account can be controlled by the child themselves from the age of seven -the age from which a child can have their own bank account.

While a cheque-guarantee card is not allowed until the age of 18, some banks offer access through cash cards. The Co-Operative Bank's Bonus Account pays interest and a bonus annually to the age of 18. A cash card is provided from the age of 11, and the account is linked to the wildlife conservation charity Born Free, a donation going to it when an account is opened.

Children are excluded from taking out tax-free Isas until the age of 16, when they can save through a mini cash Isa. Full Isa investment is only available from the age of 18. A range of fund managers and friendly societies have child-specific offerings with tax advantages. Each child has a tax-free friendly society allowance of £270 a year. Most friendly societies offer child-specific 10-year investments in either with-profits or managed-fund investments. Fund managers also offer savings plans for children. These include investment trust managers Witan, Scottish Investment Trust, Foreign & Colonial and Baillie Gifford.

Apart from trusts and other tax shelters, it is worth bearing in mind that money gifts made to children can have tax implications. If a parent gives money to a child and the income from the savings is more than £100 a year, then it is treated as the parent's income.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

    £16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

    h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

    £35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

    Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

    £Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

    Citifocus Ltd: Operational Risk Analyst

    £Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

    Day In a Page

    Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

    Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

    Our partner charities help veterans on the brink – and get them back on their feet
    Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

    Putin’s far-right ambition

    Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
    Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

    Escape to Moominland

    What was the inspiration for Finland's most famous family?
    Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

    24-Hour party person

    Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
    Michelle Obama's school dinners: America’s children have a message for the First Lady

    A taste for rebellion

    US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
    Colouring books for adults: How the French are going crazy for Crayolas

    Colouring books for adults

    How the French are going crazy for Crayolas
    Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

    What would you do as a local politician faced with an impossible choice of cuts?

    Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
    Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

    Call me Ed Mozart

    Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire
    10 best stocking fillers for foodies

    Festive treats: 10 best stocking fillers for foodies

    From boozy milk to wasabi, give the food-lover in your life some extra-special, unusual treats to wake up to on Christmas morning
    Phil Hughes head injury: He had one weakness – it has come back to haunt him

    Phil Hughes had one weakness – it has come back to haunt him

    Prolific opener had world at his feet until Harmison and Flintoff bounced him
    'I have an age of attraction that starts as low as four': How do you deal with a paedophile who has never committed a crime?

    'I am a paedophile'

    Is our approach to sex offenders helping to create more victims?
    How bad do you have to be to lose a Home Office contract?

    How bad do you have to be to lose a Home Office contract?

    Serco given Yarl’s Wood immigration contract despite ‘vast failings’
    Green Party on the march in Bristol: From a lost deposit to victory

    From a lost deposit to victory

    Green Party on the march in Bristol
    Putting the grot right into Santa's grotto

    Winter blunderlands

    Putting the grot into grotto
    'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

    'It just came to us, why not do it naked?'

    London's first nude free runner captured in breathtaking images across capital