Here, Which? rounds-up the best financial gift ideas that can help kids meet life goals, whether that's buying their first car, paying their way through university, or putting down a deposit on a home.
4 financial gifts for Christmas
Cold hard cash is the default option for people stumped for what to give, but instead of stuffing a £20 note in a Christmas card, think about wrapping it up in one of the following products:
1. Junior Isas
A Junior ISA (Jisa) is a long-term savings or investment account that parents and legal guardians can open for under-18s. They can be a great way to give a child a head start in life – and cash invested in them will earn interest. They can also help your child avoid a bill from HMRC.
A Junior Isa, however, allows you to save up to £9,000 for your child every year, tax-free.
2. Children's savings account
There are several different types of products for children on the market and which one you choose will depend on your savings goals and circumstances. Here are the main ones available to open for under-18s:
Instant-accessRegular saver Fixed bonds3. NS&I premium bonds
Anyone aged 16 or over can buy premium bonds from National Savings & Investments (NS&I) and you can buy them on behalf of a child or grandchild, giving them a chance of winning up to £1m.
The minimum investment is £25, with a maximum holding of £50,000. Children can take charge of managing their premium bonds when they turn 16.
However, if you're looking for guaranteed growth on the cash being saved, premium bonds aren't the way to go. Even with average luck, someone investing £1,000 will probably win nothing over a year.
Find out more:4. Children's pensions
It's never too early to start saving for retirement. You can help a young person build their savings by opening a pension fund that they can access when they retire.
Pensions can be opened for a child anytime from birth until they turn 18 and, although only a parent or legal guardian can start one, anyone can contribute once it's up and running.
You have until 5 April 2024 to use the current annual allowance. But you don’t have to pay in this much: most providers let you contribute £25 a month at the lower end.
Find out more:Do children need to pay inheritance tax on cash gifts?
If you survive for seven years after making the gift, no inheritance tax is due. However, if you die within this time, the gift will be considered part of your estate for inheritance tax purposes.
Generally, PETs are applied to your £325,000 tax-free allowance before the rest of your estate. So, unless you've given gifts worth more than this allowance, the recipients are very unlikely to pay inheritance tax.
However, if much of the tax-free allowance has been used up against PETs and taxable lifetime gifts, this can leave little or no allowance to be used against the rest of the estate.
Another way to gift money to your children is through a mortgage deposit, but you should take independent advice before going ahead with this.
Inheritance tax in general is a hugely complicated area so it's worth speaking to a professional for advice on your specific circumstances.
Find out more:source https://www.which.co.uk/news/article/4-financial-gift-ideas-for-children-this-christmas-amoGC3B3CGl4