Gifts that keep giving

We suggest some financial presents to give loved ones this Christmas.

CASH

You can give up to €3,000 in tax-free cash to your friends or family. Under the small-gift exemption, individuals can receive up to €3,000 tax-free from another individual in any one calendar year. Cash gifts above this amount are taxed at 33% gift tax.

“The small-gift exemption is a great way to give a cash gift to someone,” said Vincent Digby, of Impartial Financial Advice, a fee-based adviser in Dublin.

“We would encourage parents or grandparents to make use of it if they have spare cash they want to give to children or grandchildren.”

PRIZE BONDS

Prize bonds are a popular financial gift at Christmas, and suitable for children. These bonds pay no return, but holders can win tax-free prizes ranging from €50 to a jackpot of €1m. The latter is paid out in March, June, September and December.

The weekly draw has a top prize of €50,000, 10 prizes of €1,000, 10 of €500, and more than 6,000 of €50.

Each prize bond costs €6.25, with a minimum purchase of four. The bonds can be exchanged for cash at their face value any time after being held for three months.

Nearly 390,000 prizes were won by holders of prize bonds last year, according to the Prize Bond Company.

“If you are considering investing in Prize Bonds, or buying them as a Christmas gift, we advise buying the bonds no later than December 19, to be eligible for the €1m Christmas draw,” said a spokesman for the company.

A ticket for the National Lottery’s Christmas Millionaire Raffle, which takes place on New Year’s Eve, is an alternative to prize bonds. Unlike the latter, which are entered in every draw and can always be cashed in, the raffle ticket is worthless after the draw.

More than 3,000 prizes will be won in this year’s raffle, ranging from €500 to a jackpot of €1m. Tickets cost €20 each and come with a gift wallet and envelope.

INVESTMENT FUNDS

The present of an investment in a fund is an alternative financial gift that could keep on giving long after Christmas. You can invest in a fund or buy shares in a company on behalf of a child using a bare trust.

“The trust is opened under the name of the child, but the trustee controls where the money is invested until the child turns 18,” said Digby.

Zurich Life’s Child’s Savings Plus is a dedicated investment product aimed at customers who want to make gifts to loved ones.

Jonathan Daly, product manager at Zurich Life, said: “Coming up to Christmas, many grandparents or god- parents look to make a financial contribution to their grandchild’s or godchild’s future. It’s something that will be much appreciated by parents.”

SHARES

Shares are another financial Christmas gift with the potential to appreciate rapidly in value. For example, a €500 present of shares in Apple given in Christmas 2006 would be worth €5,600 today.

Last month, investment firm Cantor Fitzgerald tipped the shares in Facebook, Ryanair, Daimler, Paddy Power Betfair and City of London Investment Trust to go up in considerably in value by Christmas 2021, potentially making them a good gift to give this year. “These five stocks should be structural long-term winners within their respective sectors, and should offer investors substantial returns over a three- to five-year period,” Cantor said.

VOUCHERS

Gift vouchers are a cash alternative that eliminate the possibility of giving someone an unwanted gift.

However, they carry their own risks. For example, you are not automatically entitled to change when you use gift vouchers, and some expire within six months.

The Competition and Consumer Protection Commission (CCPC) said: “Check all the terms and conditions, including the expiry date and whether it has a partial encashment policy — in other words, what happens to the amount left over if you buy something for less than the total value of the gift voucher or card.” Vouchers that can be used only in a single shop or chain can be risky presents, because they may not be honoured if the business closes down. For this reason, the CCPC advises consumers to consider giving a multi-store voucher, which can be used in more than one shop. Such vouchers include the One4all and FromMe2You cards.

MONEY CARDS

An alternative to a gift voucher is a money card, which is prepaid and preloaded with cash. This card can be used like a debit card in shops and for online purchases.

“With prepaid cards, you need to watch out for purchase fees, top-up fees and inactivity fees,” said Moynihan.

For example, purchases made using a Swirl prepaid MasterCard cost from 0.75c to €2.95, while there is a €3.50 monthly inactivity fee if the cards isn’t used at least once every two months.

SAVINGS ACCOUNTS

Opening a savings account for a child can give them the gift of understanding the value of money and turn them into lifelong savers.

Marah Curtin, who manages Cents for Kids, an initiative designed to teach children about money, run by Davy Private Clients, said: “With all the Christmas excess, it’s not a bad time for parents to give their children the gift of some ‘common cents’ when it comes to money.

“The value of money, how to earn it, and how to save it, are good lessons to learn early in life.”

Most banks have dedicated child savings accounts that don’t incur transaction or account maintenance fees.

Ulster Bank’s Urfirst savings account, for children up to 11, pays 1.26% AER interest and comes with a Henri Hippo moneybox. A relative or friend over 18 can open the account as a gift for a loved one.

Bank of Ireland’s Young Saver account is for children aged up to 12. The account pays 0.25% AER interest and comes with a free backpack.

AIB’s Junior Saver account is for 7- to 11-year-olds. It pays 2.26% AER interest on balances up to €1,000, and 0.05% on larger balances. The account comes with a free moneybox.

Permanent TSB’s Safari Saver account is for children aged between 7 and 12, and pays 0.65% AER interest up to €20,000, and 0.80% on larger balances.