Financial Gifts You Can Give to Your Children This Christmas Season

December 21, 2021 Mutual Fund

The Christmas season is around the corner, it’s time to binge on yummy plum cakes and fill your shopping bags with Christmas decor and gifts for your loved ones. Amid the pandemic last year, families had to tone down the usual way of celebration to prevent the spread of the COVID-19 virus.

Now that Christmas 2021 is almost here, it’s time to soak in the Christmassy feeling, the time for “giving”, merriment, shopping for gifts, enjoying festive markets, etc. Christmas is a special day for children as they associate this occasion with gifts, believing that the gifts are presented by Santa Claus himself.

Given that, on this occasion parents plan to gift their children something unique and useful. Many children today are attracted to materialistic things such as mobile phones, laptops, video games, etc. which may help them to be tech-savvy and smart but keep them away from the concept of saving money for the future. Educating kids about money is very important and guiding them to use it in the right manner as well.

If you are also planning to give your child a gift this Christmas, make it a level up and give them something that will help them to be financially disciplined and financially independent. It is necessary to teach children money lessons at an early age so that they don’t start believing that the money grows on trees. Plus, learning to manage money at an early age will make a child financially disciplined and instil a good financial habit of saving for their future.

Let me help you with some financial gift options and money lessons that you can give your children as a Christmas day gift:

1. Gift a Piggy Bank

This would also help you to introduce children to the concept of saving money and how it can help you buy the things you desire at a later stage. A piggy bank will inculcate the good habit of saving small amounts regularly. Once the piggy bank is full, they can buy their much-awaited toy or something that they desire.

Children need to be told about the importance of savings in a unique way. You need to explain that it’s not about how much money one makes, but it’s how one saves it. This will encourage them to understand that the more they save, the more they will be able to accumulate and it will help them to buy things they desire. This will push them to save more and inculcate the habit of saving in them.

2. Children’s Bank Account

This can be the option for slightly older kids. You can gift them their own savings bank account and add some amount as the initial deposit. You don’t need to wait until the child turns 18 years of age to open their own savings bank account. Several banks, both public and private sector banks, are offering savings accounts for kids, which come with different features. You just need to fulfil the basic documentation requirements, and they will be classified as a minor’s account.

For instance, ICICI Bank offers Smart Stars Saving Account for kids a minor above the age of 10 years, similarly, HDFC Bank offers Kids Advantage Account, whereas PehlaKadam and PehliUdaan are savings account for children offered by the State Bank of India (SBI).

Depositing money in a savings bank account is a step further than saving the money in a piggy bank, as with time the money in the account will earn your child interest. Further, it will help you to introduce children to banking.

Most of the banks also issue debit cards for kids above the age of 7 years. As a parent, you can introduce them to the kid’s savings account, and can also consider applying for it digitally with online banking. As children adapt to banking at an early age, this will introduce them to many other concepts about money and learn more.

For a girl child, you may consider Sukanya Samriddhi Yojana (SSY) which is a government-backed small deposit scheme for a girl child and her financial needs. Sukanya Samriddhi Account provides a higher rate of interest of 7.6% compounded annually than other Savings Plans that offer financial security for the girl child. A Sukanya Samriddhi Account can be opened any time after the birth of a girl child till she turns 10, where you will have to deposit a minimum of Rs 250/-.

3. Gift Financial Books and Board Games

You can easily find simple finance books with examples and pictures, just for kids. Such books will introduce them to the concept of money management, savings, investing, etc. The explanation will be simple and will be easy for kids to understand. From kindergarten through high school, such financial literacy books offer age-appropriate lessons to equip your kids with money management tools that will last a lifetime.

You may also introduce children to a few board games associated with money such as Monopoly, Game of Life (similar to monopoly), Cash flow (inspired by Robert Kiyosaki’s Rich Dad, Poor Dad it teaches how to be in better control of your finances), Payday (teaches how to manage monthly budgets), etc. When your child grows up, they would appreciate the lessons and the values you have imparted.

It is necessary to teach the nuances of prudent money management to children at an early age. This would make them understand the value of hard-earned money and how they should manage money. Consciously impart the right financial education to the children at the right age in this fast-moving world. This could be one of the unique Christmas gifts you can give your children.

4. Gift Gold Investments to Your Child

Gold has always been a mark of wealth; it is looked up to as a haven in times of economic uncertainties. Considering the current scenario where gold prices have retraced and the uncertainty is looming, it makes sense to invest in gold for your child’s future.

On the occasion of Christmas, gift your child gold but uniquely, instead of gifting physical gold that may raise security concerns consider gifting Gold ETFs or investing in the Gold saving fund in their name. You may consider investing in Gold ETFs with a long term approach based on your set financial goals for your child’s future.

Gold ETFs are similar to mutual funds and the price of the ETF correlates with the underlying physical gold, adding the flexibility of equity investment to the age-old simple gold investment. In simple words, buying gold ETFs means purchasing gold in electronic format.

Gold Savings fund consists of simple investments. It is a mutual fund that invests in Gold ETFs instead of regular ETFs. It’s a kind of ‘fund-of-fund’ scheme that invests its corpus into an underlying Gold ETF, which benchmarks the performance against the physical prices of gold.

5. Gift your child a Fixed deposit

As a parent, you are concerned about your child’s future and how you will manage their financial requirements. Due to the rising cost of living and education, it has become very important for parents to start saving early to secure the financial future of their children.

Just saving money in a bank account may not serve the purpose. Instead, parents should choose suitable investment options to secure the financial future of their children. It always helps to invest as early as possible to give your investment the time to grow and accumulate the requisite corpus.

You may consider investing a lumpsum amount in fixed deposits to build a corpus for your child’s future needs. Fixed deposits will earn better interest than keeping funds in a savings account. You can plan as per your requirement the tenure for fixed deposit and select a worthy plan that offers a decent rate of interest.

6. Health Insurance Cover

This Christmas, consider buying an optimal health insurance cover for your child. Due to the rising cost of medical treatment, it is better to equip yourself with health insurance for your child at least till he/she turns a major. Most health insurance plans cover almost all major illnesses, injuries, and annual health check-ups, which can be handy during every stage of a child’s growth. After your child turns a major, he/she could buy a separate health insurance cover independently.

7. Gift a SIP to your Child

This Christmas, instead of buying your kids some expensive materialistic gifts, invest for their future. Looking at the prevailing uncertain times, it will be prudent to invest in your child’s future at an early age. It could be for their higher education or marriage, etc. for which you may start your investments by gifting your child a SIP in their name. Higher education both abroad and in the country has become very expensive. Thus, parents should start investing in a proper investment instrument to meet the expenses at the right time.

To start with, the various investment options favour investment for kids’ future. If your goals are long term such as 10 years away, you can invest in instruments like mutual funds with Systematic Investment Plan (SIPs). For long-term goals, experts suggest, equity mutual funds work great as an investment vehicle, where you can invest through monthly SIPs.

This may not be a physical gift for your child, but Systematic Investment Plan (SIP) can be really helpful in the long run. There are many mutual fund houses, which have mutual fund schemes specifically for kids’ education or future. Notably, the habit of saving and investing leads to a financially secure future.

8. Gift Card

Digitization is leading the financial world and we are moving towards a cashless environment, so it becomes essential to introduce your children to the advancement in financial technology. Instead of gifting them cash gifts, this Christmas consider Gift cards.

Gift cards are prepaid cards offered by banks and are widely accepted today at various merchandise outlets and online shopping portals, etc. Make sure the amount you fill in is reasonable and can fulfil the need of the kid. This will build responsibility in kids on choosing the product within their limits and help them understand how plastic money works.

Parents can help their children in using these gift cards and explain how money can be managed in various ways apart from cash transactions. You don’t need to worry about the security of the money, as a gift card comes with a unique PIN, plus it’s easy to handle as opposed to cash.

In addition, a financial lesson that you can teach your children this Christmas season is, you can involve your children in the preparation for Christmas and ask them to manage and spend accordingly. This will be a lesson you can teach them this Christmas introducing them to the concept of budgeting and smart spending. Give them a certain amount of budget or if they have been saving in piggy banks or bank account ask them to utilise that money.

Let your children know that after they save their money, how they should go about spending it smartly. They need to know how they can make the most of their money by spending their money in a way that adds more value to their life.

Therefore, this Christmas season consider buying financial gifts for your children that could assist them to learn good financial habits and maintain financial discipline. As mentioned above each of these gifts could offer different types of returns and lessons for your children. Such financial gifts will add value to your children’s financial future.

Merry Christmas!

This article first appeared on PersonalFN here