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Top four financial gifts for your child

Parents will spend a huge amount on presents for young children this festive season, new research shows. But is your money better spent on a gift for your child's future?

Children of all ages may be looking forward to unwrapping a pile of presents on Christmas morning.

In total, mums and dads across the UK will spend a hefty £135 million on their young offspring, according to the Post Office.

However, in these times of austerity, a financial gift could prove more valuable.

1. Premium bonds

If you're looking for a "fun" financial gift, and fancy a flutter, you could give your son or daughter a bundle of premium bonds.

Each month, instead of earning interest, the holder is in with the chance of winning a tax-free cheque for £25 or one of a host of prizes up to the £1 million jackpot.

Equally, parents looking to invest for the longer-term could put money into an investment fund, such as a unit trust or open-ended investment company (OEIC).

"As most investments will be for a period of 10-18 years, it is likely the returns will be much better than cash savings," says Patrick Connolly from adviser Chase de Vere.

2. A junior ISA

Junior individual savings account (Junior ISA) are open to anyone under 18 who does not have a child trust fund and are a great way to build a nest egg for your loved ones.

Parents, grandparents and family friends can put up to £3,720 a year into one of these accounts, and the money can be split between cash and equities (stocks and shares).

The account will not mature until the child reaches 18.

3. A dedicated children's savings account

Another simple gift you could give your little one this Christmas is a dedicated children's savings account.

At present, Halifax is paying 6 per cent on its Kids Regular Saver 12-month fixed-rate bond on deposits of between £10 and £100 a month.

Halifax and Lloyds both have variable accounts paying 3 per cent.

But remember to sign form R85 which allows your child to receive interest without having tax deducted.

4. Think about life insurance

It may be nowhere near as exciting as a Furby or a LeapFrog LeapPad, but buying a life insurance policy for yourself could prove to be a great gift for your child.

Life cover pays a guaranteed lump sum to dependants on death, giving both you and your loved ones peace of mind that liabilities are going to be met.

The good news is, the cover is generally inexpensive.

"It's easy to get lost in the excitement of Christmas and splurge on your children," says Matthew Lloyd, head of life insurance at Confused.com.

"While it may not be a topic families want to discuss over the festive period, for those who have children, life insurance provides a vital lifeline."

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Esther Shaw

Esther Shaw

Esther Shaw is a regular contributor to Confused.com and is the former deputy money editor at The Independent and Independent on Sunday. Before that, she worked as a money and City reporter on The Daily Express and Sunday Express.
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