How to give the gift of financial freedom this Christmas

Spending time with your children and grandchildren – whether they’re five or 55 years old – is one of the great joys of Christmastime. And for many, selecting the perfect gift is an important part of getting into the festive spirit.

However, if you feel the recipient will already be showered with plenty of gifts by other loving relatives – such as toys or the latest tech gadgets – you could consider a financial gift with long-term impact.

Here are four suggestions for how to go about this, based on your child or grandchild’s age.

1. Start a pension for a child under 10

With the cost of living rising all the time, it’s likely that children born today will need substantial savings to be able to retire.

For younger children, a small physical gift to open on Christmas Day is usually important. In the background, though, you could also consider offering a financial gift that they will appreciate when they are much older.

A child pension may be the perfect way to boost your loved one’s financial freedom in the decades to come.

As of the 2025/26 tax year:

• A child pension must be set up by the parent or legal guardian.
• Anyone – parents, grandparents, or other relatives – can pay in up to £2,880 a year combined.
• The government adds basic-rate tax relief of 20% onto these payments.

Importantly, the pension funds will be invested by the provider and ideally benefit from compound growth.

Let’s imagine you started a pension for your eight-year-old grandchild with an initial contribution of £2,000. Every Christmas, you pay a further £1,000 into the pot. Assuming a 5% annual return, the pension pot would grow to just over £22,000 by the time they’re 21.

Once your loved one starts earning their own money at around 21, they already have a pot of £22,000 waiting to benefit from further compound growth. Using this example, if they paid a further £200 a month into the pot until they retire at 60, the pot could grow to nearly £450,000. By contrast, paying £200 a month into an empty pension pot between 21 and 60 would leave them with around £289,000.

These illustrations are unlikely to be 100% accurate for your circumstances, but they offer an idea of just how powerful starting a pension for a child can be.

2. Pay into a Junior ISA on behalf of a teenager

Your teenage loved ones may now be gaining financial awareness, perhaps even earning their own wages through part-time work or home chores.

In fact, research reported by FTAdviser suggests that younger generations are more financially savvy than those that came before them, particularly when it comes to investing.

With this in mind, you could pay into a Junior ISA (JISA) belonging to your teenage child or grandchild this Christmas.

Remember that:

• There are two types of JISAs: Cash JISAs and Stocks and Shares JISAs.
• Your child’s savings can earn interest tax-free in a Cash JISA, whereas Stocks and Shares JISAs may gain tax-free investment returns (funds are subject to capital loss risk).
• Across both types, the maximum contribution limit is £9,000 a year (2025/26).
• Once the child turns 18, the JISA becomes an adult ISA, and the account holder can access their money.

Paying into a teen’s JISA could help set them up for their next steps. They may have plans to attend university, go into an apprenticeship, or even start their own business – so today’s boost may be invaluable to them tomorrow.

3. Help cover expensive essentials for those in their 20s and 30s

Your young relatives in their 20s and 30s may be experiencing their first financial “crunch time”. In other words, they’re working hard to make ends meet while juggling major responsibilities, such as mortgage repayments and childcare costs.

This Christmas, you could offer some relief by giving financial support either as a lump sum or ongoing payments.

A lump sum could help them:

• Pay for home improvements
• Put down a deposit on a new home
• Clear expensive debt, such as a car loan.

Ongoing support may be useful for:

• Monthly expenses like mortgage or rent
• Nursery or school fees
• Boosting consistent savings, investments, or pension contributions.

Taking some of the weight off their shoulders could help your child or grandchild achieve all-important financial freedom.

4. Talk to loved ones over 40 about the financial help they need

If your children are in the run-up to retirement themselves, you may empathise with the costs they’re facing.

Known as the “sandwich generation” – with many facing responsibilities for both their children and their elderly parents or grandparents – loved ones in their 40s may be financially strained, even if they’re high earners.

At this stage, there is no “right” way to offer financial support. In fact, a productive conversation may point you in the right direction if you want to help.

Whether it’s boosting their pension contributions, clearing debts, or helping with children’s school or university fees, there are so many routes you could take to give a financial boost.

Be aware that financial gifts may be taxable

Your financial gifts, while meaningful, could be subject to tax.

Read our recent insights to learn more about gifting and tax:

• Will you pay Capital Gains Tax on inherited assets?
• Income Tax on savings: Will you pay, how much, and what can you do about it?
• The ultimate balancing act: Gifting versus saving
• Are you running the Hotel of Mum and Dad? Here’s what you need to know
• 2 often-overlooked positives of leaving a living legacy

Remember, the above insights are just guides that may or may not be applicable to your situation. To discuss your gifting plans with a financial planner, get in touch with the Kellands team today.

Email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, tax planning, or will writing.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

< back to News & Views