It’s not easy deciding what to give the children in your life for Christmas. But, if the prospect of a digital voucher, yet another video game or more battery-powered plastic isn’t giving you a warm glow, there’s a wealth of options for enthusiastic savers and investors that want to pass on that passion.
Help set the kids up for life with our Christmas present ideas from babies through to teens.
Babies and toddlers
The very youngest children in your family will be totally oblivious to whatever gift you buy. Cuddly soft toys can easily be tossed aside and boxes regularly spark more delight than the gift they contained.
With that in mind, this is the prime age to consider paying into a savings or investment plan for a child.
Each year, up to £9,000 can be invested on behalf of a child into a Junior individual savings account (ISA) which grows tax free, and the money cannot be accessed until they are 18.
There is a choice of cash and stocks and shares Junior ISAs.
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Rising interest rates are making cash ISAs look more appealing than they once did – with the best accounts paying up to 5% at the moment. But over an investment horizon that could span 18 years, stocks and shares will likely offer greater growth potential.
However, it doesn’t have to be one or the other. If the child already has a cash Junior ISA, they can still have a stocks and shares version, so long as the total investment into both doesn’t exceed £9,000 a year.
A payment into any Junior ISA might not sound like the most exciting of gifts. But although the lucky recipient might not share any appreciation while they are still little, the power of compounding throughout their childhood means they will likely be very grateful for your generosity once they turn 18.
Young children learn through play and, with experts believing attitudes to money are shaped by the age of seven, it’s never too early to start playing games that encourage them to start understanding the basics.
Good starters include board games such as Pop to the Shops as well as toys that encourage them to role-play shopping, such as pretend money and food. This provides lots of opportunities to improve numeracy skills and start talking about how much different items might cost and whether they have enough money.
Gifts like piggy banks, wallets, and purses (perhaps with a few coins or a note in them already) pave the way to give children some control over their own money and can empower them to start making some financial decisions. It might just be “shall I buy some football cards, or put it towards a football?”, but it’s a step in the right direction.
As children start to get a bit older, there are plenty more games to teach them about money and spark productive conversations around the kitchen table.
Monopoly, for example, provides the perfect introduction to budgeting and managing your cash flow. Successful players will need to save, be ready to pay their taxes and be prepared for emergencies. The best players though will be those who also understand the need to take some risk from time to time, know how to spot financial opportunities and are able to negotiate or strike deals with their fellow players.
The Game of Life is another great option (and arguably less stressful than Monopoly) creating opportunities for players to weigh up decisions around education, work and family as the game progresses.
As children get older they will also start wanting more financial autonomy and you might want to encourage them to start saving for things. An instant access account that pays interest will always be better than a piggy bank, but children of this age might engage more with one of a number of children’s pre-paid cards.
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In addition to a card that they can use out at the shops or online, some cards also feature apps that allow them to set savings goals, manage any chores they are getting paid for and interactive tools to teach them about personal finance. Parents can put limits on the cards too, restricting amounts children can spend and where they can use the card.
Personalised cards, pre-loaded with money, make a great Christmas gift, but if you aren’t the parent, always discuss the idea with them first.
If you don’t want a child to fritter away any money you give them, another popular option is to buy them some Premium Bonds for Christmas.
Instead of earning interest as they would with a savings account, each £1 bond that they own is entered into a prize draw each month. Prizes range from £25 to a £1 million jackpot.
But while Premium Bonds are certainly a fun way for children to save, with the chance of winning a prize much more exciting than a regular interest payment, returns are not guaranteed. Currently NS&I says the odds of winning are 21,000 to one, for every £1 bond. That means savers need to have a pretty sizeable stake to be in with a chance of enjoying regular wins.
Once children start secondary school the years will be flying by, with teenagers wanting ever increasing financial independence.
Whether they want to spend money on clothes, trainers or tech, there remain plenty of opportunities to help them save and learn the benefits of delayed gratification.
However, as their understanding of the world around them grows and adulthood draws ever closer, it’s helpful for teens (and even tweens) to start learning about investing and why it’s important to save for longer-term goals.
If they have a stocks and shares Junior ISA, a fantastic idea is to buy an investment on their behalf which they can view on their platform.
Rather than researching and choosing something yourself, it might make more sense to discuss it with the teen in question and let them pick.
It could be shares in a company that they are interested in, for example, giving them a business to watch and follow. It’s not the end of the world if it doesn’t end up being the best choice if you’ve only invested a small amount. It’s the learning experience that counts.
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Alternatively, with your help, they could choose a pooled investment such as a fund or an exchange-traded fund (ETF). This can provide a great introduction to long-term investing, prompting discussions around risk and reward and the benefits of diversification in a portfolio.
With funds, it’s worth talking to them about what countries or industries they would like to invest in and whether they have any environmental or ethical concerns that need to be factored into the decision.
ISA rules mean the child won’t be able to access their money until they are 18. But younger teenagers can still be involved and start making their own investment decisions, if their parent agrees.
Once they turn 18, the account will roll into an adult ISA (with the higher £20,000 annual allowance) which they can access at any time.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.