There are gifts and there are gifts. Rather than getting more toys for your children and grandchildren for Christmas, have you considered setting up a savings or investment account for them?
How many times have you searched for and found the perfect gift only for your children to be bored with them within a few days? If you are still searching for that perfect gift you’re in luck. Instead of searching for gifts begin searching for accounts.
Setting up a savings or an investment account for your children or grandchildren is a great way to open a discussion with your children about money and give the value of the real-world experience of making choices.
If you’re giving cash/investment gifts for grandchildren and since there are numerous options on offer, ask the child’s parents what they would prefer you to do as they may want you to contribute to an account they have already set up.
The type of accounts you’re going to set up will depend on how you want the child to access the money. You may set up one in which he will be able to withdraw funds before the age of 18 or after the age of 18. You may actually decide that the money in that account be for big expenses like university fees books and other serious stuff.
If you want the child to be able to access their money, a savings account is a good option. Paying money into it and watching it grow is a great way of instilling a savings habit and teaching children the value of money. You can open an account in a child’s name at any age but you will have to manage it until they are seven.
Although savings accounts are a safe haven for all Christmas cash and cheques, if you regard your gift as a long-term investment you might be disappointed by the low rate of growth they offer.
For long-term savings, investment accounts will be better. Whatever your relationship to the child, there are a number of investments you can make in the child’s name. If you want to invest money in the stock market, the most sensible option is a collective fund such as an open-ended investment company or OEIC, a unit trust, or an investment trust. Whatever type of investments to choose, remember that the children cannot actually own it until they turn 18 as you will have to manage the investments on their behalf until then it’s worth thinking about the best way of holding the money. The straightforward option is to designate the account to the child; this means you keep control of the money and can decide when they will receive it. However, you will be liable for tax on the growth.
Will be talking about these different kinds of accounts later. But for now, I just want you to know that you can actually give a gift that has a future in it.
Just don’t forget that it is highly unlikely that any of the sensible gifts will feature highly on many children’s wishlist for Christmas, but you never know they come to thank you for your prudence some years down the line :).
Merry Christmas.Niyi Adeoshun
Money Management Coach
Author of the newly-published book:"Winning Together"
(A Couple's Guide to Success With Money and Marriage)