This time of year brings thoughts of gifts and presents for friends and family. If you’re considering a financial gift for your loved ones, what are the best options? And are there any tax consequences to be aware of when sharing your wealth? Matthew Curtis, our Director in Hong Kong, looks at some money-themed gifts you might want to consider.
Financial gifts can be a thoughtful and practical gift for your loved ones. If you choose to share a money-themed gift with younger members of the family it can often be a good opportunity to help boost financial literacy or spark an interest in managing money too. But whether your chosen recipient is young or old here are a few financial gift options which might inspire you.
Gifts for children
It’s never too early to talk to children about money – and help educate them about the importance of managing their own finances. For younger children there are several good and age appropriate options:
- Piggy bank or money jar – a physical space to store coins and notes is a good way to help teach children about the concept of saving. Choosing a clear jar or piggy bank which they can see into helps children understand how savings can grow over time and with dedication. This option means you can encourage them to save for their own choice of toy or game too.
- Money based games – there are plenty of gifts which help teach young children about budgeting and spending. As well as classics like Game of Life, which explores the importance of money in different life stages, and the concept of planning for retirement, there are a range of other options available which put money at the centre of the game.
- Books – financial guides for children can be a practical present and some of the most popular for pre-teens include The Kids Money Book and Usborne’s fun and friendly Questions and Answers about Money.
Gifts for teens
- Bank cards – for tweens and teens a more mature version of the piggy bank is their own bank card. There are a wealth of options including GoHenry, Natwest Rooster and Nimbl. All offer pre-paid debit cards giving parents and grandparents the option to top up funds and manage the account through the app.
- Games – board games can also help instil some of the fundamentals of finance. Monopoly is the classic financial game, and Cashflow encourages you to build wealth and achieve financial freedom by acquiring property, stocks, businesses and precious metals. As well as being fun and educational it replicates real life situations, including buying property and investing in the stock market.
- JISAs – the Junior ISA might be a good option for younger UK resident children and is useful if you want to make a cash gift that could open up discussions about investment choices. You can contribute a maximum of GBP9,000 a year and help encourage children to save for their future; they can’t access any funds until they’re 18. A major incentive is that any growth or income generated in the JISA is tax-free.
Gifts for adults
- Money Books – The Intelligent Investor is classed by Warren Buffet as the ultimate book on investing, so might be useful if investments and building wealth is an interest of your chosen recipient. Other options include Think and Grow Rich – a fascinating study of the money habits of 500 successful individuals over 20 years – and The Psychology of Money – 19 short stories exploring the different, and sometimes unusual, ways people think about money.
- Wine or spirits – an alternative asset, with appeal too, wine and spirits offer a great gift and a possible investment option. Take a look at reputable merchants including Berry Bros & Rudd to find something which your recipient loves, and which might give them something to store away for a rainy day!
- Art – art, of course, should be appreciated first and foremost. But if you’re keen to gift a piece of the art market there are some useful tools including Art 2 Arts which can help you source a piece which suits your recipient’s preference and your budget.
Gifts for everyone
- Premium Bonds – these are a great alternative to cash gifts or vouchers, and which may be an option depending on where the recipient resides in the world. They are very low risk, with UK government backing and can be cashed in at any time.
- Stocks and shares – there’s always the option of gifting shares in a company that your friend or family member has an affiliation with. It’s likely you’d need to buy the shares yourself and transfer ownership which may feel unnecessarily complex.
- Cash – the ultimate financial gift, there’s always the option to share some of your wealth at this time of year.
Whenever it comes to financial gifts it’s important to consider whether there are any tax consequences of sharing wealth. With cash gifts remember, for UK domiciled individuals, there are rules – you can gift up to GBP3,000 each tax year without incurring Inheritance Tax and you can choose to pass on this amount to one person or divide among several different people. If you didn’t use this allowance last year you can roll it forward to and add to your current limit to make a total of GBP6,000. Thankfully spouses and civil partners are generally free from any of these rules – as long as they share the same domicile or the non domicile spouse is the one making the gift to a UK domicile spouse. In addition to your IHT annual exemption there’s an exemption for small gifts of GBP250 per person per year – the gifts can’t be to the same person and can’t exempt part of a larger gift. When it comes to gifting shares don’t forget Capital Gains Tax may apply.
As ever, if you would like to discuss any aspects of your finances, including sharing your wealth, please contact your nearest office.