A financial-themed present is unlikely to be at the top of a child’s (or adult’s) Christmas list. Yet a well thought out gift can make a real difference to their future relationship with money.
Think how magical it would be for them if your Christmas present this year transformed itself into savings that they could spend in years to come on a gap year, their first car, or as a deposit on their first home.
A Christmas present such as…
1. A Star Wars R2-D2 money box
Reluctant savers need a little encouragement! Why not make saving fun with an R2-D2 talking money box; the droid beeps and whistles every time you put money in it.
2. A gift of money
If you don’t want the taxman to take a large chunk of your hard-earned legacy, you can start gifting your assets away. This will immediately reduce your estate and lower your family’s inheritance tax bill when you die.
You can gift money to a charity or towards a wedding. If you gift more substantial amounts – more than your annual £3,000 ‘gift allowance’ – you must live for at least another 7 years for it to be exempt from inheritance tax.
Alternatively, you can invest in Business Property Relief (BPR) qualifying businesses which can be left to your beneficiaries inheritance tax free, as long as you have owned them for at least 2 years.
3. The Game of Life board game
Originally created in 1860, this board game simulates a person’s travels through life. As you work your way around the board, you will encounter some of the main events life has to offer, from college to retirement, jobs, marriage and possibly children. It also throws in random financial surprises to keep you on your toes.
It’s a fun, family-friendly game that teaches children how life changes and the importance of safeguarding yourself against the unknown.
4. Premium bonds
A favourite of generations past, premium bonds may not be as glamorous as other financial Christmas gifts but they do still appeal to many no matter what their age.
Even though the odds of winning have reduced in recent years, the premium bonds monthly prize draw offers a chance to win big, tax-free. Prizes range from £25 to £1 million, but of course you could be unlucky and win nothing.
5. An ISA
ISAs come in many forms: NISAs, Junior ISAs, and Lifetime ISAs. They are a highly tax efficient way for children and adults alike to save money for a future event of their choice.
If, for example, you have a teenage child who may want to use the money when they turn 18, a cash Junior ISA (JISA) is a sensible option. For longer timescales, the stock market is likely to outperform cash.
6. A pension
Setting up and contributing to a pension for a loved one is perhaps the least instantly gratifying of all the Christmas gift ideas here. You may not even be around to witness the benefit it brings and, for that reason alone, it’s probably more of an option for those with eyes on the distant future.
Not only do pension contributions gain tax relief – even for non-tax paying children – the effect of compounding over the years will probably make you wish that a nice relative had set up a pension for you when you were young!
7. An investment fund
How about setting up an investment fund? Gift an initial lump sum this Christmas and pass (a hopefully a larger sum) on when they are 18. Or, better still, get your budding investor interested and involved in the process. Investing early allows time to factor in market volatility. We know the stock market can be risky, but we also know that in the long term, sectors such as emerging markets, have the potential to offer impressive returns.
If you aren’t confident choosing individual shares, why not use a fund manager as it does the hard work for you! Speak to one of our advisers for some ideas and advice.
8. Gold coins
Not an obvious choice but we humans have held a long-term fascination with gold. A gold coin doesn’t produce an income and needs to be stored carefully…not lost down the back of the sofa!
The price of gold fluctuates with time and tends to be in demand when financial markets are struggling. One thing gold coins do always offer that other investments don’t is something to appreciate, admire and touch.
8. A donation to charity
Christmas is certainly a time to encourage charitable donations to help those in need. With the use of gift aid, you can boost the amount the charity receives by an extra 25p for every £1 you donate.
As long as you have completed the charity’s gift aid declaration and you have paid at least as much income tax or capital gains tax in the same tax year as your gift, the charity can claim gift aid.
It’s not just the charity that can benefit either. If you are a higher or additional rate taxpayer, you can claim back the difference between the rate of tax you pay and the basic rate claimed by the charity on your donation. You can do this either via your self-assessment tax return or by asking HMRC to amend your tax code.
Now for a bit of fun…
How about a “Please do not confuse your Google search with my medical degree” mug? This is more of a Christmas gift to yourself or a fellow medic than it is for a loved one but, as the saying goes, time is money. Putting one of these mugs on your desk may well save you some time when you’re dealing with those self-diagnosing patients who are all too keen to explain why they need brain surgery for a mild headache…“Google told me!”
And finally, there’s always a lottery ticket – someone has to win it!
At the end of the day, a financial-themed Christmas gift may not get the most attention on the day, but it could well end up being the most appreciated in the years to come.
Can you think of any other Christmas present ideas with a financial twist? Let us know by adding a comment below.
As always, taxation rules and the complexities around eligibility need to be considered when looking at inheritance tax planning, ISAs and pensions; we recommend that you do this with the help of the appropriate professionals.