Whether it’s older generations or younger family members, receiving financial gifts can be handy, especially during tough economic times. So, why not give something a little different this year? As it’s Talk Money week from 7th November, why not start a conversation within your family about money and your financial plans? But, first, let’s take a look at some options…
Swap the chocolate coin for real gold
A fun gift that will hold its weight in gold (literally!). Although the price of gold varies, this is a tangible present that will be appreciated more than a chocolate coin (except for chocoholics). For children, a gold coin will be viewed as “treasure”, and for older people, you could give them a coin with meaning. The Royal Mint regularly releases special commemorative gold coins, which can be passed down through your family from one generation to the next.
Stuff stockings with Premium Bonds
Premium Bonds are most people’s starting point when it comes to safe investing. It’s a simple concept with the allure of winning big money prizes each month. You need to be over 16 to buy Premium Bonds, but you can purchase on behalf of a child. Their bond will be entered into the draw each month, giving them a chance to win between £25 and £1 million. Premium Bonds are backed by the government, but winning a prize is down to luck.
Get into the spirit of savings and investments
No matter what age group, a financial gift in the form of savings or investments can become a very useful source of cash or income. Below are some ideas:
- Open a children’s savings account. Many high street banks and building societies are currently offering attractive interest rates. However, check terms and conditions carefully, as some accounts require a minimum monthly payment to achieve the interest rate. If in doubt, speak to our team.
- Set up a trust fund. You could create a Bare Trust. Although commonly used by grandparents for children under 18, the beneficiary does not necessarily have to be a child. Personal tax allowances will apply if the beneficiary is over 18 (see next point about parental settlement rules), but there would be no inheritance tax issues.
- Start a unit trust investment. Money is pooled together and managed by a fund manager with the aim of increasing the investment. Any income over £100 per year is taxable. If you’re investing on behalf of an unmarried or minor child, then parental settlement rules would apply (except for Capital Gains Tax). So any taxable income would be liable to the parent and not the child.
Jingle all the way with a Junior ISA
A parent or guardian can set up a Junior ISA, but anyone in your family can contribute up to the annual allowance (currently £9,000). Putting money into a Junior ISA will allow you to grow a savings pot, which could become an important source of funds in years to come. You can choose between a cash ISA or investing in stocks and shares. This can be a helpful way to educate younger children and encourage positive savings habits.
Tis the season to be jolly with a Junior SIPP
A Junior SIPP is a type of pension and could be an ideal gift for a child who has everything. Similar to an adult SIPP (Self Invested Personal Pension), money is invested, and you have flexibility in how to manage the funds. There is a limit for maximum gross contributions and an attractive 20% tax relief by the government. So, this could be a good way to grow a sizeable pension pot for your child or grandchild. For more details, please speak to our financial planners.
Let’s talk about money
Financial gifts can be a great conversation starter. Unfortunately, in many families, money conversations are still very much taboo. Money chats typically arise when parents or grandparents reach a certain age and start considering inheritance tax or care costs.
Involving different generations in your financial planning meetings can be highly beneficial. Not only does this create an open dialogue with your loved ones, but you can have all-around discussions to plan how you will protect and invest your wealth and family legacy.
Some families worry about younger children losing their work ethic when they learn the value of earnings. If you want to avoid future reliance on the Bank of Mum and Dad, then a financial gift is a great way to prepare a young person for adult life.
If you need help starting a conversation about financial gifts and plans, we can help. Get in touch to speak to our financial planners.