How to gift money to children this Christmas

(Image credit: © Getty Images/iStockphoto)

From junior ISAs, Premium Bonds, to pensions - there are many way you can give money to children.

Christmas is days away, but before you head to the shops to grab the hottest toys for 2025 – such as the Star Wars crystal light saber, a L.O.L surprise magic flyer or TY Bouncers – would you consider swapping these out for a pension, stocks or a monthly lucky dip with Premium Bonds?

To be fair, the toys sound fun and while I am not suggesting you forgo presents children can open on the big day, you could boost their financial futures with these money gifts.Here’s how to give the kids the gift that will keep on giving – plus some easy wins if you're stuck and need a last-minute Christmas gift idea.

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Lucky cash

Cash may seem boring, but it’s quick, easy, and the kids (depending on their age) love it.

But let me tell you a little tale about why cash symbolises so much more than just a quick win gift.

In my culture, giving cash is not just the norm, it is good luck. When cash is gifted in Hinduism, an extra £1 is always added so, if you wanted to give £50, you would add £1 to make it £51.

Why bother, you may wonder, but the saying goes that if you give an extra pound, you are not just giving cash, you are giving the gift of the continuation of good fortune – and odd numbers also signify unending prosperity.

So, if you are popping cash into an envelope this year, pop an extra pound in and wish them good fortune.

Fill up their Junior ISAs

You may not not want to hand over cash and instead want to give them a savings boost for their future.

If so, why not boost their junior ISA (JISA) and let their money grow tax-free until they are 18.

If your child or grandchild is still very young, let the power of compounding work its magic this Christmas by putting the money into stocks and shares JISA, which could do better than just cash.

Calculations from investment platform AJ Bell shows if you invested £1,000 a year from birth until the child is 18, they would have around £8,000, assuming an average investment return of 5%, compared to the typical 2% on cash return.

The returns could be higher as you would be investing over 18 years, which is plenty of time to let your money grow and take advantage of stock market gains.

However, JISAs are very inflexible – once the money goes in, it cannot be taken out by anyone other than the child when they are 18. The money will legally belong to them too, so if at 18 they wish to blow it all on a house party, you may have little power to stop them.

So, on that note, be sure to instil good money habits.

According to AJ Bell, three funds to consider for your child’s Junior ISA are:

Fidelity Index World – a low-cost passive fund that tracks the global stock market and only costs 0.12% a year.
JP Morgan Emerging Markets Investment Trust Accumulation – if you’re comfortable with a bit more risk and have a long-term vision, emerging markets could be an option. The trust invests in around 70 large companies in the emerging markets. It costs 0.79% a year.
Liontrust Sustainable Future Global Growth – if you like the idea of investing sustainability, this fund invests in companies around the world that provide or produce sustainable products and services. It costs 0.85% a year.

You could even add stocks of their favourite brands, like Disney or Apple, for example.

Swap Peppa Pig for a pension?

Pensions are also a tax-efficient way to save for children and you can start to save for a child’s retirement fund with a Junior Sipp (self-invested personal pension) from birth.

You can pay in up to £2,880 each tax year and the government adds up to £720 (20% tax relief) on top.

Both parents and grandparents can pay into a Junior Sipp.

If you put in £2,880 every year in a child’s SIPP, topped up with government tax relief of £12,960, you’d have saved £64,800 over 18 years. If those contributions grow by an annual compound growth rate of 5%, then at 18 the pension would be worth an impressive £107,619. Even if no further contributions were ever made after this age, the pension would tip over £1 million by the age of 62, just in time for retirement, BestInvest calculates.

The only downside with this is that they will have to wait an incredibly long time to enjoy this gift as currently the minimum age is 55, but this is set to rise to 57 on 6 April 2028.  

Premium Bonds for children – could they be mini millionaires?

NS&I’s Premium Bonds are a popular choice when giving financial gifts and could give your kids a chance to win a £1 million jackpot draw every month.

You can buy Premium Bonds from £25 for anyone, but the parent or legal guardian will have control of the bonds if you’re buying for children, until they are 16.

Though Premium Bonds do not earn interest, the kids will enjoy checking for a prize each month, which could encourage them to save.

Pocket money apps

Finally, you could give them a pre–paid card and simply boost their pocket money via these apps.

For example, GoHenry is aimed at children aged six to 18. The prepaid card works like a debit card, but you can see how they spend their money and it’s easy to top-up.

A pre-paid card is also a great educational tool to help them learn about how money works.

The cards can be personalised with their name and favourite images, ranging from cute pets to football players, and cars.

The account pricing starts from £3.99 a month, but it’s free for the first month.

Other prepaid cards to consider are RoosterMoney (£19.99 a year) and Nimbl (£32 a year), which work in a similar way.

Make sure you leave enough time for these to arrive for Christmas if you are planning to give this as a gift on the day itself.

Kalpana is an award-winning journalist with extensive experience in financial journalism. She is also the author of Invest Now: The Simple Guide to Boosting Your Finances (Heligo) and children's money book Get to Know Money (DK Books).

Her work includes writing for a number of media outlets, from national papers, magazines to books.

She has written for national papers and well-known women’s lifestyle and luxury titles. She was finance editor for Cosmopolitan, Good Housekeeping, Red and Prima.

She started her career at the Financial Times group, covering pensions and investments.

As a money expert, Kalpana is a regular guest on TV and radio – appearances include BBC One’s Morning Live, ITV’s Eat Well, Save Well, Sky News and more. She was also the resident money expert for the BBC Money 101 podcast .

Kalpana writes a monthly money column for Ideal Home and a weekly one for Woman magazine, alongside a monthly 'Ask Kalpana' column for Woman magazine.

Kalpana also often speaks at events. She is passionate about helping people be better with their money; her particular passion is to educate more people about getting started with investing the right way and promoting financial education.