As unwanted Christmas gifts languish in the corner, research reveals the huge investment power of a small pot of money given to children and invested for later life.
Opinium Research on behalf of St James’s Place asked parents of under-18s how much would be spent on Christmas presents for their children. The average sum was £352 per child, with £63 of this being on wasted gifts.
Looking at regional variations, in London 35 per cent of gifts were considered as a waste, while in the East Midlands it was 20 per cent. Overall, this is an estimated total £760 million of unwanted gifts that are disposed of.
Four-fifths of parents found this level of waste to be worrying, with nearly one-third worried about the financial loss, one-fifth concerned about the environment impact and three-tenths unhappy about the example it sets.
What else could the money be spent on?
With one-fifth of children’s gifts purely a waste, is there anything more useful than could be done with the money to benefit a child later on in life?
Putting just £1 per day into a Junior ISA will amass around £11,000 if this is done from birth until the age of 18. By the age of 35, the average age of buying a first home in the UK, the pot would be worth nearly £25,000.
A Junior ISA is one of the most popular ways to save for children. With compound interest paid and no tax payable, small regular contributions mount up into useful capital over the years and can be used for large items of expenditure such as university fees or even a deposit on a house purchase.
As much as £9,000 can be put into a Junior ISA each year, although even smaller amounts will build into a good sum.
When it comes to pensions, investing the sum of £5.50 each day for a child from birth until the age of 10 could result in a pension pot worth as much as £1 million by the age of 65.
Rob Gardner, campaigner for financial education and co-founder and CEO of Redington, calculated the figure, saying that nothing else needs to be contributed after the age of ten.
The assumption is that the money will double every ten years (based on 7 per cent growth) and that the government will top the contributions up by 25 per cent.
Saving just £1 per day would result in a pot of £140,000 at age 55 and £275,000 at age 65.
If the £1 per day investment was continued to age 20, then stopped, £210,000 would be saved by age 55 and £420,000 by age 65.
Planning for the future
In whatever way that savings are made, putting aside a small sum of money instead of wasting it on unwanted gifts could turn into a huge advantage for a child in later life when a financial boost is needed most.
Cutting down on gifts today will not only lower environmental impact and reduce children’s expectations, it could be as valuable as a deposit on a first home one day.