While giving cash at Christmas might feel impersonal, it can often be the most valuable and appreciated gift for a child. The secret lies in making the gift memorable and ensuring it has a lasting, positive impact on their financial future. With careful planning, a £100 gift today could be worth significantly more by the time they reach adulthood.
For Newborns: The Ultimate Long-Term Investment
Instead of a toy a baby will never recall, consider a gift that secures their financial future decades from now. A Junior SIPP (Self-Invested Personal Pension) is a powerful, ultra-long-term option. Even though children don't pay tax, they are eligible for valuable tax relief on pension savings.
This means the government effectively adds free money to your contribution. You can gift up to £2,880 in a tax year, and the state will top this up to £3,600. The child cannot access the funds until at least age 55 (rising to 57 from 2028), but the potential growth is substantial.
Laura Suter of investment group AJ Bell notes that a single £2,880 contribution could grow to approximately £46,500 by the time the child turns 57. Financial advisors or DIY investment platforms can help set up a Junior SIPP. Opting for a low-cost tracker fund is a smart way to build wealth without high fees eating into returns. Contributions can continue until the child is 18, with the government top-up applying each year.
For Young Children: Tax-Free Growth with a Junior ISA
With many families feeling the pinch from the cost-of-living crisis, contributing to an existing Junior ISA (Jisa) can be a more practical and welcome gift than a physical present. A Jisa is a long-term savings vehicle where all growth is tax-free. The money belongs to the child and converts to a standard ISA when they turn 18.
Research from Scottish Friendly indicates that 79% of grandparents would happily contribute to a savings fund instead of buying a gift if asked by parents. Of those, 67% would still give a small present to open on Christmas day.
If you start contributing £50 at each Christmas and birthday from when a child is five, assuming 5% annual growth, they could have over £1,800 by age 18. Starting from birth could see the pot near £3,000. Stocks and shares Jisas can be set up via investment platforms, with 'robo-investors' like Wealthify offering managed options for those who prefer not to choose funds themselves.
For Tweens & Teens: Learning and Earning
Teaching children about money is crucial in an increasingly cashless and digital world. For children around ten years old, who cannot yet have a standard current account, a pre-paid pocket money card is an excellent educational tool. These cards, often paired with a parent-controlled app, help monitor spending and encourage saving habits.
Several banks offer free options if you are an existing customer. For example, the Rooster card is available to customers of NatWest, RBS, or Ulster Bank and includes a chore tracker feature. Starling Bank offers the Kite card, and Revolut provides a junior version for a small delivery fee. Paid services like GoHenry (£3.99/month) offer additional features, including in-app financial literacy lessons called 'Money Missions'.
For teenagers who love to spend, cash can be made memorable. Services like Thumble Games (£4.99) let you design a personalised video game where solving puzzles reveals a secret message about a cash gift. Alternatively, physical puzzle boxes or money mazes that must be unlocked to retrieve cash or vouchers add excitement and novelty to a financial present.
Ultimately, a financial gift given with thought and a long-term vision can provide far more value than its initial price tag, laying the foundation for a child's future financial security and literacy.
