Christmas is a time for joy and giving. But sometimes, those carefully selected presents just go to waste. New research from St James’s Place has found that 18% of children’s Christmas presents will go unused, be exchanged or get thrown away this year.
So is there a better way? We’re here to break down some alternatives that could just give your child a head start in their financial life.
Do all children’s Christmas presents get used?
Unfortunately the answer to this question is no. While a lot of presents will be loved and played with, according to the figures from a study of 1,002 parents, around a fifth of presents will be wasted. This equates to £63 per child. And adds up to a whopping £760m in children’s Christmas presents that go unused each year.
It is understandable that parents are concerned about what this means. In fact, 79% said that they are worried about waste at Christmas time. They cited concerns about the environmental impact, but also the potential financial loss of spending money on things that aren’t needed.
And this year has been a year like no other. A significant number of parents (39%) responded that they were considering gifting a financial investment to their child or children. Let’s face it, the cost of this pandemic will need to be paid for somehow, and the worry is that it will fall to future generations.
What can I do instead?
If some of the concerns around wasteful children’s Christmas presents hit home for you, then what else can you give them this Christmas?
While it may not be the hottest toy of the year, giving a financial gift to your child could make a significant difference to their future. Let’s take a look at the options.
Junior ISA (JISA)
When you think about Christmas presents, you probably don’t think about savings accounts. But a Junior ISA (JISA) is a tax-free way of saving for your child (or children). It is a long-term savings account which is only available for young people. Any child up to the age of 18 living in the UK can have a JISA. And they can save up to £9,000 in it each year (for the tax year 2020/21).
Anyone can pay into a JISA as long as they have the correct account details. This makes it perfect for those aunts and uncles that just don’t know what to get your child for Christmas.
Your child will not be able to access the money in their JISA until they turn 18. This means there is plenty of time to build a nice healthy savings pot.
In fact, St James’s Place states that even if you saved just £1 a day, this could turn into £11,000 by your child’s 18th birthday. By the time they are 34 (the average age of first-time home buyers in the UK) this could reach nearly £25,000.
Pension
A pension? For a child? It may seem a bit out there, but bear with me. It is just a different take on traditional Christmas presents for children.
According to St James’s Place, starting a pension for your child as soon as they are born could lead to significant sums later on in life.
Young investors can take advantage of time, which is the main point when it comes to investing. If you have time on your hands, then you can afford to be a bit riskier. You can sit back and ride out any shocks to the market, and therefore achieve higher growth returns.
Even as non-taxpayers, children still get the basic-rate tax relief on contributions. This means a maximum of £2,880 a year is automatically grossed up to take advantage of tax at 25%. So you are looking at an annual investment of £3,600.
Prepaid card
If you still want to ‘give’ something to your children on Christmas day, and want them to learn good money habits, then a child-friendly prepaid card is a good alternative Christmas present.
Cards from the likes of gohenry allow parents to keep control of the account through real-time spend notifications and the ability to freeze the account if need be. But it is your child’s card and account, and they can use to save and spend as they wish.
