Gifts that keep on giving

Christmas is coming and with it, the season of goodwill.

Whilst buying gifts for children can bring a great deal of joy, the fact is that the families of our clients are usually in a fortunate position – meaning children often end up with far too many toys. We’re often asked advice by clients faced with this dilemma…So, what are the alternatives?

Cash

Giving money can often be seen as a boring or impersonal gift. But as children grow older, they prefer to choose their own presents anyway, so at least by giving cash, you know that your money will be used for something that will be appreciated. For new born children, money can be a welcome gift to help buy larger purchases such as prams, car seats or nursery furniture. Another alternative is to ask the children’s parents to set up a bank account in the child’s name to be contributed into over the years.

 

Investments

When it comes to investing for a child’s future, some relatives like to use Junior ISA’s (JISA’s). Although parents have to open the JISA on behalf of their children, parents, family or friends can all save on behalf of the child as long as the total stays under the annual limit, which is £4,368 for the tax year 2019-20. Much like full adult ISA’s, there are two types of Junior ISA available – Cash JISA’s and Stock and Shares JISA’s. These work in a very similar way to the adult versions, although it’s only possible to have one Junior cash ISA and one Junior stocks and shares ISA at any one time.

One of the benefits of JISA’s is that when managed effectively in a Stocks and Shares ISA, it’s possible to generate some steady investment returns that will usually outperform interest rates available on bank/savings accounts or Cash JISA’s. As the money can’t be withdrawn and must be held in the account until the child reaches 18, dividends and investment gains can be reinvested. There is therefore the opportunity for funds to accumulate year on year, with any gains also being entirely free of tax.

 

Premium Bonds

NS&I Premium Bonds remain a popular choice for relatives wanting to gift monies to younger relatives. Premium Bonds can now be purchased in the name of a child under 16 by any adult, and the minimum purchase is only £25. Prizes to be won range from £25 right up to £1 million and any winnings can either be paid into a nominated bank account tax free or reinvested in further Premium Bonds.

It’s worth knowing that under current rules, children are able access Premium Bonds at age 16, at which point they can cash in all the bonds should they choose. Until that time, a nominated parent or guardian will need to be assigned to look after the bonds.

Something that we often advise clients is to buy a small gift to their children/grandchildren to open, alongside the monetary gift. Offering the best of both worlds, you still get to experience the joy of them opening and playing with a gift as well as being able to provide a step on the ladder towards a wealthier future.

Who could ask for a better gift than that?

 

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