Alternative gifts to give this Christmas
Financial presents may receive a warmer welcome than usual this year, as purse strings remain tight. However, more exciting alternatives to the usual festive cheque or Christmas voucher are not always obvious, so here are some gift ideas you may not have considered.
The London 2012 Olympics were the focal point of an exciting and eventful year in which the Jubilee, a US election and an endless trail of scandals also featured prominently.
Those who would like a memento of the games but are unmoved by the appeal of a Wenlock or Mandeville soft toy can remember the event in another way. As part of the celebrations, the Royal Mint created 29 different 50 pence coins depicting various Olympic and Paralympic sports, from archery and hammer throwing to high jump and wheelchair basketball.
Almost 30 million were circulated, but the Royal Mint estimates that some 70% will be hoarded by collectors, making them rather valuable. The coins are currently selling on eBay for more than three times their face value. An entire set can be picked up for about £50.
Children should be encouraged to understand and take an interest in investing, says Gary Reynolds, chief investment officer at wealth management company Courtiers. He says there is no better way to get them interested than buying them company shares.
"You need a big company with a strong balance sheet," he adds. He cites power company Drax as a company with a strong organisation and an attractive price-to-earnings ratio, but concedes that such a company may not excite the young would-be investor.
Perhaps shares in Vodafone, which is very cash generative, or Tesco might be a better way to get a child engaged. Adam Seale at our sister website Interactive Investor bought his chocoholic 14-year-old daughter a cocoa exchange traded fund and Disney shares.
He says: "They've both performed well and she was very pleased with the cocoa ETF, as she probably eats about 3% of the world chocolate supply." An individual needs to be aged 18 or over to own shares, but shares can be held in a trust or pension for a child.
NS&I CHILDREN'S BONDS
NS&I Children's Bonds can make a great budget gift, as the minimum investment is just £25. Formerly known as Children's Bonus Bonds, these investments were renamed in September 2012 to reflect a change in how interest is paid. A single annual rate of interest - currently 2.5% - is now paid on the bonds, a slightly higher rate than previously, to make up for the fact that no bonus is now paid at the end of the bond's five-year term.
New rules determine that the bonds mature on a child's 16th birthday, rather than their 21st as before, and that only parents, guardians and grandparents can buy the bonds for a child.
Gold has traditionally been a popular financial gift, be it in jewellery, coin or bar form. Some gold price watchers think the gold price will reach $2,000 per ounce (£1,250), although many others suspect the precious metal has peaked for now.
However, hefty rises in the prices of some other metals make them an attractive alternative. Silver and platinum could make fantastic gifts this Christmas that might soar in value.
Reynolds warns against giving metals for the sake of it, however. He says it is best to choose jewellery you genuinely like and regard any increase in its value as a bonus. Platinum is currently priced at $1,589.60 and silver at $32.48, having risen 15.7% and 85.5% respectively over the past three years.
A pension may not sound the most exciting gift for a child to open on Christmas day, but they will be grateful for it come retirement and any relative can contribute. Contributions of £2,880 will be topped up through tax relief to the annual limit of £3,600 and annual payments of this amount for 18 years could prove lucrative by age 55.
Figures from JPMorgan show that the pension pot would be worth more than £630,000 on retirement assuming an annual interest rate of 5%.
Child SIPPs are available for do-it-yourself investors, but stakeholder pensions are a good option for the novice, as charges are low (the maximum charge is 1.5% for the first 10 years and 1% per year thereafter).
This article was written for our sister publication Money Observer
An Exchange traded fund is a security that tracks an index or commodity but is traded in the same way as a share on an exchange. ETFs allow investors the convenience of purchasing a broad basket of securities in a single transaction, essentially offering the convenience of a stock with the diversification offered by a pooled fund, such as a unit trust. Investors buying an ETF are basically investing in the performance of an underlying bundle of securities, usually those representing a particular index or sector. They have no front or back-end fees but, because they trade as shares, each ETF purchase will be charged a brokerage commission.