Gifts of money are great if you are stuck for ideas and time. And more than half of us are planning to put a cash pressie under the tree this Christmas, according to a survey by PayYOURway.org.uk.
But don’t just wrap a tenner up with a ribbon. There are more imaginative ways to give a financial present this Christmas. Why not buy vouchers or gift cards? Or how about a top-up for a text mad teenager’s pay-as-you-go mobile phone?
Then there are pre-paid cards, which you simply load with cash to suit your budget. The cards are easy to use and widely accepted – just watch out for charges. Many cards impose an application fee, plus a monthly fee. You might also have to pay a fee every time you make a purchase with the card, or use it to withdraw cash from an ATM.
If you are giving a cash gift to a child, you might like to open a savings account – and there are some decent deals on offer.
Halifax’s Kids Regular Saver pays a fixed rate of 6% for one year as long as you pay into the account each month. Or, a child can earn 4.25% a year in Clydesdale Bank’s Child Savings Bond, which runs for five years.
If you don’t want to tie your money up in a bond, Northern Rock’s Little Rock Instant Access account pays 3%, as does Lloyds TSB’s Young Saver.
Tax at 20% is normally automatically deducted from any interest in a savings account. Most children don’t have to pay tax, so you should apply to have the interest paid gross, by filling in form R85. But beware the £100 rule. If the money in a child’s account is given by a parent, any interest over £100 a year is taxed as the parent’s own.
Premium Bonds are popular gifts for children. They aren’t a savings account so they don’t pay interest. Instead you are entered into a monthly prize draw with a chance of winning a £1m tax-free jackpot. NS&I also pays out one million other tax-free prizes every month, ranging from £25 to £100,000. They can be fun as Christmas presents, just remember that you are effectively taking a gamble with your cash!