Do you remember what you had for your birthday when you were 8 years old?
What about for Christmas when you were 12?
Does anything spring to mind or are you struggling to recall what was inside the shiny wrapped presents you were so excited about at the time?
Very few people actually remember the gifts they received when they were little ‘uns – unless, of course, one turned into their favourite childhood toy that they decided to hold onto for many years. So, it should come as no surprise that the UK is a nation of wasteful gifters!
In a recent study conducted by Opinium Research on behalf of Wealthify, it was discovered that an estimated £733 million is spent on unwanted Christmas gifts for children each year1, and that 78% of parents say their little ones receive gifts they don’t want during the festive season.
To put this into perspective, the average value of these ‘wasted’ gifts equates to £264.80 per child.
Our research also found that only 34% of these Christmas presents last longer than one month. Even more shockingly, only 19% of parents say that the average gift their child receives will last longer than a year. So, a lot of money could be being wasted on gifts that quickly get forgotten.
So, what ends up happening to these unwanted Christmas gifts?
Unfortunately, only 26% of parents said they recycle these unwanted gifts, with 11% admitting that they simply put some of them in general waste – meaning they later end up in landfill. However, more than half (52%) donate them to charity, while a third (33%) regift them to others. Meanwhile, 32% said they keep some unwanted gifts around the house.
So, why do we as a nation like to spend so much money on children’s gifts that will eventually fall to the bottom of the toy box, lay forgotten under the bed, or end up in landfill where they damage our planet?
There’s no denying that it’s lovely seeing our children’s happy little (or not so little!) faces light up when they receive a gift that they really wanted from us or another family member, but just how long does that novelty last? As the results of our survey indicate, when they’re young, it may not be that long.
But what if we told you that you could give the special child in your life a present that they’ll never be able to forget by investing in their future?
That’s the magic of a Junior ISA.
What is a Junior ISA?
According to our research, over a third of parents would rather save for their child’s future than buy gifts for them at Christmas. If you feel the same, then we have good news – you could do this with a little something called a Junior ISA (or ‘JISA’), which is a savings or investment account that could be a great first step to getting your little ones on the right path to a successful financial future.
The way it works is that a parent or guardian opens the account and pays into it for their little one – contributing as much as they like*, as often as they like. The JISA is owned by the child, not the parent, and the money in it can only be accessed by them when they turn 18.
Each year, parents can save tax efficiently in their child’s Junior ISA – and it doesn’t affect their own personal tax allowance. This means that if your little one has a JISA that you pay into, they won’t pay tax on any interest or dividends they gain.
*Although the allowance for what you can save or invest in a Junior ISA is subject to change, for the year 2021/22, you can save or invest up to £9,000 tax-efficiently.
How does Wealthify’s Junior ISA work?
At Wealthify, we specifically offer a Junior Stocks and Shares ISA, which means that your little one’s money will be invested in the stock market. As a result, it could have more potential for growth over the years.
You can open a Junior ISA for your child as soon as they’re born, and the money in the account will only become available to the child when they turn 18. This means that the sooner you start investing, the more likely it is they could benefit from compound interest, which is when any profits they’ve made are reinvested and can make profits of their own
However, it’s important to remember that because stock markets can go up and down, your capital is at risk when you invest, so your child could always get back less than what was invested for them.
Special note about compound interest: As the money in a JISA cannot be withdrawn until the child’s 18th birthday, it means that any profits made over the years will be re-invested into the Plan - and if the markets perform well, these profits could lead to more profits. Over a long timeframe this could have a snowball effect!
In fact, here’s how much your little one could end up with based on the average amount spent on gifts per child each year:
If a total of £264 was invested every year in a Junior Stocks and Shares ISA, it could be worth £6,589 after 18 years2
If even half the amount spent on unwanted gifts (£132) was invested in a Junior Stocks and Shares ISA, after 18 years, it could be worth £3,2943
Can friends and family pay into a Junior ISA?
Our research found that 39% of grandparents, 12% of Godparents, and 13% of family friends choose to give money instead of physical gifts. So, if your nearest and dearest would usually give your child money, instead of handing them some cash, they could put this money in their Junior ISA (if they have one).
Because the money in a Junior ISA can’t be accessed by your child until they turn 18, the money paid in could be used to help them reach big milestones in future – such as heading off to university, buying their first car, or putting a deposit on a house. It’s a gift that has the potential to keep giving way after the festive season has ended!
Many providers, such as Wealthify, will allow others to pay into your child’s Junior ISA – which could potentially boost your little one’s savings even more. And if they have a Wealthify JISA, this is really quick and easy to do. Anyone who decides to become a contributor to your child’s Junior ISA with us can pay in as a one-off gift or on a regular basis.
What if my little one is expecting toys this Christmas?
How do you go from buying your child a number of shiny wrapped gifts each year to saying “Hey, here’s some money that I’ve not physically given you, but you’ll be able to enjoy it when you are 18. Happy Christmas!”?
We hear you. We understand that this can be a daunting prospect, and you’re probably thinking that, if given the chance, surely any child would want to receive an actual gift for Christmas or their birthday - right? Maybe, but not always!
Whether you’re a parent or simply a friend or family member that buys presents for a little one in your life, here are some tips to help you change the way you gift by investing in the child’s future instead – and how you can get them on board with this idea too.
How to change the way you gift with a Junior ISA
Tip 1 – Be prepared for questions
Whether you set up and contribute to a JISA for your own little one, or you’re asking your friends and family members to contribute, you probably don’t want that awkward moment on Christmas day when your child asks you, “where’s my present?”.
As a parent, it’s likely that you dread those sort of awkward moments – but sometimes these things just happen. And that’s okay. But letting your little one know about this in advance and explaining to them that they could use the money in their Junior ISA when they’re older to buy something very big and exciting – such as a car or their very own home – may just help you to avoid these situations.
Tip 2 – Start as you mean to go on
If you’re contributing to a JISA for a very young child, this could be a really nice way of making it the norm by paying some money into it every birthday or Christmas (if you can afford to do so). And with a Wealthify JISA, you could even add a fun or heartfelt message with your contribution that they can read when they turn 18 – it’s a bit like a time capsule!
It’s those meaningful yet simple touches that can make all the difference, and it could end up being a much more personal and heartfelt way to give a gift to a loved one.
Tip 3 – Give a small token
I think most of us will agree that a box of chocolates is a wonderful thing!
And at Christmas, selection boxes could be gifted along with a card explaining that you would like to put money in their Junior ISA for them to use to reach their goals in future. This way, they’ll still have a little something to open and enjoy in the moment.
However, if gifting chocolate is not an option, then any other type of small token gifts could be given too.
Tip 4 – Go for a half and half
Similar to giving the child a small gift (such as a box of chocolates) alongside your JISA contribution, you could also choose to split your Christmas budget by spending half of it on a gift and using half as a contribution into their Junior ISA. This way, as the child gets older and understands more about the importance of saving for their future, you may find changing to just giving a Junior ISA contribution as a gift a bit easier as your child won’t expect to receive lots of physical presents.
Doing this could also help to teach your little one about finance and budgeting too – which is actually a pretty cool gift to give a child that will help them in the long run!
Tip 5 – Give the gift of time
Sometimes all children need is quality time spent with their loved ones. So, offering to take the child out for the day to the park, or arranging a cinema night at home (complete with plenty of snacks!) is something that they will likely look forward to and remember for far longer than any children’s toy.
This means you can give the gift of time which costs nothing (maybe just the cost of popcorn and a movie?), and you could then put the money you would have spent on a gift into their Junior ISA. It could be a win-win situation for all – especially as you can leave a note with your contribution such as:
“Hope you enjoyed our cinema night!”
Ready to see if you could help your loved one reach their future dreams through investing? Find out more about our Junior ISA and Friends and Family Contributions.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
*Research was conducted on behalf of Wealthify by Opinium Research amongst 1,000 UK adults with children under 18.
- 733 million = 15.4 million parents with children under 18 multiplied by £260 (Average spent across ALL parents) and the value of all gifts/ 100 x 18.3 (% of gifts going unwanted)
- Confident Plan with a £22 initial investment and thereafter £22 monthly investments (£264 per year) = £6,600. Values correct as of 15/12/21.
- Confident Plan with a £11 initial investment and thereafter £11 monthly investments (£132 per year) = £3,300. Values correct as of 15/12/21