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Investing for grandchildren

Investment gifting for grandchildren

Many grandparents wish to give their grandchildren financial assistance, by investing money now to help them in the future. Although there are a number of options out there, few investments have the pure memorability and fun factor of gold and other precious metals, and few offer the same tax-free returns. From an early age, children are raised on stories of gold and treasure, so what could be better than a treasure gift of gold?

Below are a few of our suggestions to consider when investing for grandchildren with precious metals, but if you have any questions or ideas our team will be happy to help in finding the perfect item for you.

Best investment gifts for grandchildren

Fun aside, there are sound, practical reasons why gold or silver are one of the best investment gifts for grandchildren. Firstly, gold is a safe haven asset; it is frequently used in times of economic turmoil or geopolitical uncertainty. Who knows what the future may hold economically for our grandchildren’s generation? Climate change, growing digital transactions, the recent global pandemic, there are many economic unknowns in the long-term, and precious metals are a great way to protect against this uncertainty.

Unlike paper currency, gold has maintained its value through the ages, and cannot be printed on the whim of financial institutions. This makes it an ideal way of preserving wealth from one generation to another. Rare and collectible coins can become treasured family heirlooms, passed down through generations. Read more about the benefits of owning gold.

One of the main reasons physical gold makes a great investment gift for a grandchild, is that it has no counterparty risk, and is owned entirely by you or your grandchildren. When the time comes to pass the investment into their control, it can be done physically – by yourself or as part of an inheritance – without transference paperwork or disputes. There is no need for involvement of banks or financial institutions who can devalue it, or take it away. In contrast, every other investment is reliant on a third-party to store, manage, process, or control it.

For those who do prefer outside assistance, bullion gifts can be held in trust; with age or time stipulations, just in case your child plans an early trip to the toy shop!

Young boy with a gold coin

Other investments for grandchildren

Beyond precious metals there are many other investments for grandchildren you could also consider, though as we discuss below, there are drawbacks to consider. As with gold, Junior ISAs are free from UK income and capital gains taxes. Parents or guardians can top up these accounts as and when they wish, at least until the annual savings account limit is reached.

Junior Investment Accounts can also be opened by a grandparent. Assets are held ‘in trust’ until a child turns 18, and are normally taxed as if they belong to the child. They can be useful for inheritance tax planning, but cannot be accessed until the child turns eighteen. ISAs and savings accounts however suffer from notoriously low interest rates.

Currently, a Junior ISA has a rate of at best of around 4 - 5% (though many are lower) with an annual limit of £9,000 for the current tax year, and – assuming you set up an ISA for a new-born grandchild – the account would be in place for 18 years. By the time your grandchild turned 18, your gift of £9,000 would still only be worth - at best - £22,000 assuming no additional money was put into the ISA each year, and the rate was fixed. Given rates of recent years however it's likely the return would be much less, and depending on inflation, this may actually be worth less in real terms than when you started.

No one can be sure what will happen to the gold price in the coming years, but past performance speaks for itself. In the last 20 years (2004 - 2024), the return on investment for gold has been an incredible 615%. For our example of £9000 – by the time your grandchild turned 18 – this would have been worth £64,380 – a much more rewarding investment for any grandchild should history repeat itself!

Premium Bonds are another option, and these can be bought in the child’s name. The minimum investment is £1, with a chance of each £1 bond winning up to £1million each month. The problem with Premium Bonds is these chances are tiny; the prize rate is currently claimed to be equivalent to an interest rate of 4.4%, but this is a variable average, and impacted by outliers such as those who win £1,000,000. Far more likely is that you win nothing, while someone else wins lots – it is not guaranteed to get a 4.4% return.

Both Junior ISAs and Premium Bonds also involve third-party risk. Higher risk, for lower returns, is hardly the idea behind most grandparents’ well-meant gifts.

Tax implications of gifting grandchildren

Gifting, each month or annually, is a great way of ensuring wealth is passed efficiently from one generation to the next, and grandparents should consider the long-term tax implications.

Gold bullion coins and bars are not subject to VAT, and coins made in the UK are also exempt from Capital Gains Tax (CGT).

This makes UK coins like the Sovereign or Britannia perfect for gifting to grandchildren; they’re easy to store, tax-free, and valuable.

Silver is also a good alternative if you’re looking for something a little smaller to start with. The price for silver is currently far lower than gold, and some investors believe silver is overdue a significant price rise. Silver is subject to VAT, but UK coins are once again exempt from CGT, perfect for whenever your grandchild decides to sell.

Physical gold and silver bullion can be a great investment for your grandchildren; visually appealing, thrilling to hold, and valuable. Beyond the investment, a gift of a precious metal coin can also spark an interest in coin collecting, and the fascinating history that numismatics leads to. It offers safety in uncertain times, and spreads risk when used with other higher-risk investments. Above all else, it will belong totally to your grandchild alone.

BullionByPost, the UK’s number one bullion dealer, stock a huge range of bars and coins. All are sold at low margin, with prices to suit any grandparent, all with free, insured delivery. We have coins from many nations, with dates that could have personal, or family significance. There are even bullion coins featuring their favourite film and TV characters from the likes of the Simpsons, Star Wars, or Marvel movies.

We also offer a range of beautiful gift boxes, perfect for making your grandchild’s gift even more special and ready to store safely, and present when needed.

Gift box options for gold investment gifts

Please note: BullionByPost do not provide tax advice, and we recommending speaking to an accountant or independent tax advisor for any advice on tax implication of gifting precious metals. If you would like to talk to someone about making a gift of gold, please contact our support team who will be happy to assist on 0121 634 8060. Alternatively, you can email us via support@bullionbypost.co.uk.