Rather than wrapping a gift to go under the tree, lots of people are instead opting to hand over cash, gift cards or other monetary presents this year, with around two-thirds planning some form of financial gift, according to Laura Suter, head of personal finance at AJ Bell.
It's understandable that after a tough financial year many people would prefer to give (and receive) money, rather than a present, she says.
"The most popular options were cash, with a third of people planning to pop some money into a card this year, followed by giving gift cards. In a move that many people will find pretty impersonal, but others find highly practical, one in six people plan to just transfer money directly into a friend or family member's bank account.
"Likely largely the preserve of grans and grandads around the country, another 7% intend to hand over a cheque to their loved ones this year. While undoubtedly safer than sending money through the post, many young people today won't have a clue how to cash a cheque and could easily leave it dwindling in a desk drawer uncashed.
"Despite being one of the nation's favourite ways to save, not many people plan to gift Premium Bonds this year, with just 3% intending to do so. These saving accounts have the (slim) potential to make the recipient a millionaire but many will go for the ease of other options, while older children are more likely to ask for cash than the chance to take a spin on ERNIE.
"Before writing that cheque or posting a £10 note this Christmas, there may be better options for gifting money. Gift cards often go unused and get forgotten about, meaning your money is wasted, while cash could get lost in the post. Putting money into a savings or investment account, or buying Premium Bonds, might be a better way to give a longer-lasting gift that doesn't get lost down the back of the sofa."
Which financial gifts will you be giving this year? (Tick all that apply)
Physical cash 31%
Gift card 28%
Electronic transfer to their bank account 16%
Cheque 7%
Premium Bonds 3%
Paying into an investment account 2%
Cryptocurrency 2%
Other 1%
I will not be giving monetary gifts 37%
Source: AJ Bell. Based on a nationally representative survey of 2,000 UK adults carried out online by Opinium.
The pros and cons of different financial gifts
Premium Bonds:
Pros: "Premium Bonds are often a favourite for younger children, and now the minimum saving amount is just £25 it's much easier to gift them. They are Government-backed, so couldn't be safer, and you have the added bonus that they might make your child or grandkid a millionaire.
Cons: "While the expected prize fund has improved recently, and is now 2.2%, they will still earn less than a cash savings account. This ‘expected rate' is also based on the average winnings, and the bonds you buy could win nothing. With inflation high at the moment that means the spending power of your gift will be eroded year on year, particularly if the recipient doesn't cash the money in for a long time."
Cash savings account:
Pros: "If you choose to put money in a cash savings account for a child, you'll likely need the child's parents to open the account for you. You should hunt around for the best rate possible, so you are maximising the return. Just make a note to check back on the rate in a year or two, as banks have a nasty habit of slashing the interest on offer and relying on people not moving their money. So long as you're picking a provider backed by the Financial Services Compensation Scheme the money will be protected and safe."
Cons: "Cash rates have risen recently, but they are still miles away from inflation. This means any money you gift and leave in cash will lose value in real terms over the years. If you want a short-term option and know the recipient will access that money in a few years that might be ok, but for longer-term savings it can really eat into your spending power. For example, £100 saved 18 years ago would only be worth £61 today after inflation is taken into account."
Junior Stocks and Shares ISA:
Pros: "Investing is the ideal long-term place for money, making it a good option for people who are gifting money to younger children. Generally, you should invest for five years or more, so it's ideal for younger children who have 10, 15 or even 18 years until they will touch the money. Someone who saved £25 a month for their grandchild from birth to the age of 18 would generate a pot worth £8,000, assuming growth of 4% a year. The parents of the child will need to set up the Junior ISA, but once they have grandparents can contribute."
Cons: "The downside of a Junior ISA is that the money can't be accessed until they are 18, which means if your grandchild wanted it sooner they wouldn't be able to get their hands on it. Similarly, when they reach 18 they take control of the money, which means they could cash it in and go on a spending spree - despite your protests. Investing is also riskier than leaving it in cash, as the value could drop too. Generally over a longer period markets rise, but you are taking that bit more risk with the money."
Junior SIPP:
Pros: "Even non-taxpayers can pay into a pension and get tax relief, so you can put up to £2,880 into a pension each year for your child or grandchild and it will be topped up by the Government to £3,600. If you paid in the maximum each year until they reached 18, and then didn't make any further contributions they would have a pension worth almost £410,000 by the age of 55, assuming 4% annual growth. The fact that the pension is locked up for so long means you can be sure they aren't going to raid the money and spend it on something frivolous."
Cons: "The downside is that this is a very long-term investment, that the child won't be able to benefit from until they are retirement age. Currently that's 55 but it's expected to rise and so it's impossible to predict what it would be for someone who is a child at the moment."
Cash:
Pros: "More tangible than any other form of cash gift, this gives you something you can actually handover inside a card or as part of another gift. It also offers total flexibility so children can choose to spend it or save it, unlike a gift card which has to be spent by a certain date."
Cons: "On the downside, it can't be used online without first transferring it to a bank account. With so much shopping done online now this could be a hassle for some people. It can also be easily lost along with wrapping paper at Christmas."
Gift card:
Pros: "Something of a halfway house between a normal present and a cash gift, this gives the receiver some flexibility, but you can also put some thought into the sorts of places they may like to go. It should also be replaceable if lost, as long as you keep the receipt. Finally, because it has to be spent, you can guarantee they'll use it on something nice, which some will see as a perk."
Cons: "Although others will argue that the strengths of a gift card are also a weakness. If you can't find something you really want you're stuck buying something for the sake of it, with no flexibility to use it elsewhere. This is perhaps also why a lot of gift cards go unused every year, meaning that money could be wasted entirely."
Cheque:
Pros: "The main appeal with cheques is probably the nostalgia factor. Some people like the idea of receiving a cheque from a relative, and you know once the money has landed in their account. This is a slight advantage as a cheque can be rewritten if lost, whereas cash is going. Although make sure the cheque is made out to the recipient and has a specific value filled in - losing a blank cheque could obviously be a big problem."
Cons: "The downside is the hassle factor. Many people won't ever have used a cheque, and it normally means going into a branch. Some people will just forget or decide it is too much hassle, while digital banks normally require a cheque to be posted in. For some that could be the first time they've used a postage stamp as well!"
