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Giving the gift of money at Christmas

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On 14 December 2012


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It may not be as glamorous as this year's must-have Christmas list, but giving children a financial present could turn out to be far more beneficial.


Buying children toys and gadgets for Christmas can provide some nice instant gratification (although the old adage goes that many children are just as, if not more, happy to play with the boxes they came in). But what about a present that has longer-term rewards, such as some money invested for their future?

Whether you’re a grandparent, uncle, auntie, or a family friend, you can contribute to a child’s savings.

Best of all, the money you give can earn tax-free interest, so long as the child has the likes of a Junior ISA, Child Trust Fund, or a pension open in their name.

The annual contribution limits for Junior ISAs and Child Trust Funds are £3,600 a year. For a pension, it’s £2,880 although basic rate tax relief (assuming the child doesn’t have a taxable income) will top this up to £3,600 if the maximum amount is invested. The child's parents cannot access the money.

The top-paying cash Junior ISA, from Nationwide, is offering 6% interest at the moment, providing a parent has a separate ISA with the building society. And, looking more longer-term, a Junior ISA, Child Trust Fund or pension invested in the stock market, given plenty of time to grow, could provide a very handy pot either for when the child hits 18 or when they reach retirement.

So while money for the future might not have the glamour of the latest must-have console game or toy, the child could end up being very grateful for the gift of Christmas past.

Is it a good idea to give children a financial present? Let us know your thoughts in the Comments box below.

More on children's savings

The top Child Trust Funds

The best Junior ISAs

Top tax havens for babies, children and teens

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