British children are due to receive a cash windfall of some £2.4 billion1 this Christmas as parents, grandparents, aunts and uncles turn to pounds and pennies for presents this year.
MoneyExpert.com research2 shows that just under half (48%) of all adults will give cash gifts to kids this festive period, with this group handing over, on average, around £94.82.
The independent financial comparison website says that most adults are likely to give children between £20 and £50 and it is urging children – or their parents – receiving the windfalls to think carefully about where they save their cash.
MoneyExpert.com analysis shows the average interest rate paid by kids’ savings accounts is an impressive 4.975 per cent – but there are plenty of poor deals out there.
More than 130 accounts are on the market for children from banks and building societies but MoneyExpert.com figures show 30 pay less than the average with some as low as 1.5 per cent for sums of £1/£5/£10.
Sean Gardner, Chief Executive of MoneyExpert.com, said: "Giving kids some cash for Christmas is a good way to put a smile on their face – and possibly help them to get the savings habit.
"I don’t want to spoil the fun but if your child has some cash lying around on top of their Christmas presents this year, it might be worth suggesting they start saving. It might not be what every kid wants but it’s certainly a good way to introduce the idea of thinking about money."
"Nobody wants to pore over savings rates over their turkey sandwiches, however, so keep your eye on the cash and if your children haven’t spent it all after a few days why not talk to them about how to save. It might just work."
Most adults may limit themselves to £20 and £50 in cash but a smaller proportion will give more significant sums. Some eight per cent of adults are planning to part with between £101 to £250 in cash gifts alone this year.
And unsurprisingly older generations are more likely to part with the most money this Christmas – 57 per cent of people aged 55 and over said they would give cash to children as a present this year.
Parents are urged to ensure they request and complete a R85 form. This HMRC form will ensure that children do not pay tax on their interest. If the form is not completed then children will be liable for tax.
Best-paying accounts currently include Penrith Building Society’s Junior Saver Shares at 6.3 per cent while Chelsea Building Society, Bradford & Bingley and Swansea Building Society are some of the providers that also pay over 6 per cent.
1) Figure calculated by Citigate Dewe Rogerson based on a UK population figure of 46.3 million
2) All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,978 adults. Fieldwork was undertaken between 23rd – 26th November 2007. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).