Giving money at Christmas

What can you give children that they will really appreciate?

As soon as they get past the teddy bear, train set and dolls stage it can be hard to answer that question. Rather than give something likely to be consigned to the back of the cupboard before Christmas dinner is served, many of us prefer to give money. 

But there is more than one way to give that money – and at Continuum we believe some are much better than others.

You could give cash

Giving cash is simple and can solve the present problem for any child old enough to tell the difference between chocolate money and the real thing.

But while slipping a few notes inside a card is easy enough, and might be appreciated at the time, it does not show a great deal of care. Cash is easily lost and easily spent, and your generosity can soon be forgotten.

But even more important, it does not have any lasting benefit.

If you use the money to help a child start the savings habit, money really will be the gift that keeps on giving, first in the form of interest, and second by starting to build a sound approach to finance.

You can start them saving

If you can set up a savings account for a child, it will help them get a better start in adult life.

There’s another very good reason for planting the savings seed. It will provide the easy answer for all present giving not just this once, but for Christmas and birthdays for years to come.

A savings account may even provide answers for several older family members who are at a loss about what to give and will potentially grow faster as a result. 

But the question is: which type of savings should you set up?

Finding the best saving account

If you are looking for a savings account, see our online guide here.

A children’s savings account

Children’s savings accounts often have much more generous interest rates than adult accounts. Banks and building societies can see the value of getting customers young. Some come with some attractive extras designed to make learning about money fun, or discounts on some purchases or activities.

But they can also come with a lot of caveats, and the age range of children that a bank or building society is willing to accept can also vary, so make sure your child is the right age for the account.

But the biggest drawback with junior savings accounts is the same one that makes adult savings accounts unattractive. Rates are low, and low returns do little to excite young savers.

A Junior Individual Savings Account

Junior Individual Savings Account or JISAs are long-term, tax efficient savings accounts for children. Like other ISAs there is no tax to pay on any capital growth or dividends, making a JISA potentially more rewarding than high street savings accounts.

As with adult ISAs, there are cash JISAs and Stocks and Shares JISAs. So rather than savings, which may be currently producing small returns even in an ISA, the child could have investments, with the potential for substantially higher growth and returns.

In the 2021 to 2022 tax year, the savings limit for Junior ISAs is   £9,000. If relatives rally round to contribute it could mean building a substantial lump sum by the time the child turns 18.

Only a child’s parent or legal guardian can open a JISA on their behalf, although once open, other friends and relatives can contribute.

The parent or guardian will manage the account until the child turns 16, when they can take control of it. Thanks to a generous tax allowance, from age 16, they can put in money up to the level of a standard ISA allowance as well as the JISA allowance – but won’t be able to withdraw money until they turn 18. They then get full control of the JISA, which becomes an adult ISA.

A Cash ISA is as secure as any other type of saving, as money put into a cash JISA will be protected up to the value of £85,000 by the Financial Services Compensation Scheme. Money put into an investment JISA will be protected up to £85,000, although returns cannot be guaranteed.

Other solutions

A JISA can be a very good way to solve the Christmas present problem, and help a child build up a substantial cash lump sum. But it is not the only answer. Setting up a pension for a child may seem a strange thing to do, but it could take advantage of compound interest to build up a very worthwhile pension pot before the child leaves school – a pot which should carry on growing though their entire working life but which can only be accessed from normal minimum retirement age onwards.

Get them off to a better start

At Continuum, we can help you find the most appropriate JISA, look at child’s pensions or find other alternatives. Contact us to discuss how we can help you.

A professional approach to financial management is better for your child and for you.

Whatever you decide it pays to get professional help. There are many providers who can offer suitable schemes but getting the best value for your money and your child’s future needs expert knowledge of the market, and a look at your personal circumstances. 

To find out more about the best ways to give your children a better financial start, without putting your own future at risk, simply call us now. 

The Financial Conduct Authority does not regulate deposit accounts.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

Equity investments do not afford the same capital security as deposit accounts

https://www.gov.uk/junior-individual-savings-accounts

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