Christmas shopping season is in full swing and I have no idea what to buy for my nephews, so I was intrigued by the idea of contributing to their junior ISAs.
Perhaps the opportunity to discuss saving and investing with them and spark their interest in their financial future is the greater gift.
To engage them, I might suggest investing in stocks aligned with their interests. My son and his cousins use Google Classroom every day, shop on Amazon, enjoy a trip to McDonalds and drink Coke as a treat. Some of his cousins have been to Disneyland and they are all telly addicts, from watching rubbish on YouTube to browsing Netflix and Disney+. In a few years, they will be begging their parents for iPhones.
All of these companies can be accessed via an S&P 500 tracker, which might appeal to my nephews because they have been to America on holiday.
If they prefer to embark on their investment journey with an experienced hand on the tiller, plenty of active funds own these type of companies.
Among those that featured recently on Trustnet are GQG Partners US Equity (which owns Netflix, Microsoft and Meta Platforms for social media fans) and JPMorgan American (which holds McDonald’s, Amazon and Apple).
Closer to home, my nephews have read the Harry Potter books, published by Bloomsbury, snacked on sausage rolls from Greggs and painted Warhammer models.
Warhammer owner Games Workshop, which has just been promoted into the FTSE 100, is one of the UK’s most exciting growth stocks, according to Iain McCombie, manager of the Baillie Gifford UK Growth trust.
Eric Burns, deputy fund manager of SDL Buffettology, which also owns Games Workshop, said: “The shares have increased in value no less than 26 times over the past 10 years and that’s without including the steady stream of dividends. The secret to its success is offering a product that captures a piece of the customer’s mind who are fanatical and keep coming back for more.”
My nephews are avid gamers and are fascinated by technology and innovation. Tech funds proving popular with investors of all ages include the Legal & General Global Technology Index Trust, Fidelity Global Technology and the Polar Capital Technology trust.
Junior ISAs are by no means the only way to contribute to a child’s financial future. The ultimate gift that keeps on giving long-term would be money for a junior self-invested personal pension (SIPP).
As wealth manager Finura explained: “With the power of compounding and tax relief, even modest contributions can grow into a substantial retirement fund over time. Contributions attract 20% tax relief, even if the child has no income. For instance, a £2,880 contribution becomes £3,600 after tax relief.”
If you want to use the festive season as an opportunity to make a larger financial gift, you can give away up to £3,000 every tax year without it being added to the value of your estate for tax purposes. This allowance can be carried forward for one year if unused.
Larger gifts made more than seven years before death are exempt from inheritance tax.
You can also give up to £250 to as many people as you like, provided they haven't received part of your £3,000 allowance that tax year, Finura explained.
Whatever you decide to give your loved ones, I hope you are enjoying the start of the festive season.