PARENTS LOOK TO ‘A CHRISTMAS INVESTMENT’ GIFT AS RESEARCH REVEALS £760m WILL BE SPENT ON UNWANTED PRESENTS THIS YEAR

• One in five (18%) gifts to children predicted to be wasted this Christmas, equating to £63 per child
• More than three-quarters (79%) are concerned about waste at Christmas
• Two in five parents (39%) considering financial gifts this year, as Covid-19 has made them think more about the importance of saving money
• Contributing just £1 a day into a JISA until a child is 18 can accumulate to up to £11,000 – and be a much needed helping hand for younger generations who will be hit hard by the pandemic 

New research from St. James’s Place (SJP) reveals that a fifth (18%) of children’s Christmas gifts are wasted each year. This amounts to £760 million¹ worth of presents that are annually unused, unwanted, exchanged or thrown away across the whole of the UK, on average.

This Christmas, however, two in five parents (39%) plan to gift a financial investment to their child(ren), by either setting up or contributing to an account or product that will benefit them in the future, as a third (32%) say the pandemic has made them think more about the importance of saving money.

Wasted gifts

The survey of more than 1,000 parents² reveals that each child receives an average of £352³ in gifts at Christmas, with an average of £63 spent on ‘wasted’ presents. The proportion of wasted gifts varies regionally with over a third (35%) of gifts going to waste in London, 20% in the East Midlands and 18% in Yorkshire and Humberside.

Four in five (79%) parents agree that this level of waste is a worry, with 30% citing concerns over the potential financial loss of spending money on wasted items, and 21% concerned about the environmental impact of discarded gifts. A further 28% are concerned about the example it sets for their child.

The financial gifts that keep on giving

Even small financial gifts can build into big pots in the long term. A Junior ISA (17%) is the most popular way for parents to save for a child, and according to SJP’s calculations, an annual contribution of £365 – equivalent to £1 a day – invested every year from birth could turn into over £11,000 on the child’s 18^th birthday⁴. This could reach nearly £25,000 after 34 years – the average age that people buy their first home in the UK⁵.

Similarly, putting £5.50 aside every day from the day a child is born until they reach the age of 10 could result in a pension pot worth £1 million by the time they hit 65.

Rob Gardner, Director of Investment Management at St. James’s Place, said: “Thinking differently about how money is spent on gifts for children this year can make a big difference. A small change this Christmas and throughout their childhood could be the difference between a playhouse today or a home of their own tomorrow.

“Our research shows many parents expect lots of presents to be soon forgotten this year. By investing some money for their future selves, whilst focusing on the toys they really want, children can get a head start in life and still feel the joy of receiving.”

Junior ISA

A Junior ISA (JISA) is perhaps the most popular way for parents or relatives to put money aside for children and is an ideal way to provide money for a future house deposit or university fees. With the effect of compound interest, small and regular contributions can add up to life changing sums.

Up to £9,000 can now be saved into a Junior ISA during the tax year, however far smaller amounts can still result in healthy, tax free sums by the time a child turns 18.

Pensions

Starting a pension for you children as soon as they are born can give them a head start and lead to significant sums for later life.

Even as a non-taxpayer, children will still get basic-rate tax relief on contributions. That means a maximum of £2,880 a year is automatically grossed up to take account of tax at 25%, giving an annual investment of £3,600.

Young investors can also take advantage of time, meaning they can take on more risk with their investments. It’s not unusual for younger investors to be fully invested in equity funds.

Research shows that stock markets in developed countries across the world have provided average annual returns, with dividend income reinvested, of 7.2% over the past three decades.