By Caity Somers, Australian Shareholders’ Association | Friday, 20 December 

Australians love to splurge at Christmas, with families spending an average of $426 per child on toys, gadgets, and other presents. While these gifts can bring excitement, their lifespan is often short. Studies suggest many toys are played with only a handful of times before gathering dust, while others break or become obsolete within months.

But what if you used that $426 differently? Investing this annually for 10 years, and you could be sitting on $6,902.26 after a decade of growth, compounding at 6% per annum. Multiply that by the years until your child turns 18, and you could be looking at thousands of dollars. This could fund their education, help them start a business, or give them a solid financial foundation for adulthood.

By shifting even a portion of your Christmas spending toward investments in their future, you’re giving your child a gift that grows with them rather than fades away. Here are 7 alternative ways to create long-lasting benefits for your children this Christmas.

1. Start an investment portfolio

Instead of spending hundreds on toys or gadgets, consider using that money to start an investment portfolio for your child. This could involve buying shares in a blue-chip company, investing in an exchange-traded fund (ETF), or even opening a managed fund. Over time, these investments have the potential to grow significantly, providing your child with a financial nest egg when they need it most.

However, it’s important to understand the tax implications of investing for your child. If the investment is in your child’s name, any unearned income over $416 per year may attract penalty tax rates. Alternatively, holding the investment in your name allows you to manage the tax impact and claim deductions, but the investment will legally remain yours. Whatever route you choose, this is a powerful way to transform Christmas spending into a long-term gift that keeps on giving.

2. Contribute to a savings account

Open or contribute to a high-interest savings account in your child’s name. This could be used later for education expenses, travel, or any aspirations they have as they grow. Many banks offer accounts tailored for children, encouraging financial literacy by showing how savings grow over time. Make it even more engaging by sharing the savings progress with your child, helping them learn the value of delayed gratification.

3. Buy educational subscriptions

Invest in their learning with an educational subscription. Platforms like ABC Reading Eggs, Codeacademy, or Masterclass can help your child develop new skills, from coding to creative writing. Unlike toys that often get forgotten, these tools provide ongoing opportunities for personal development and foster a love of learning that can last a lifetime.

4. Enrol them in a course or workshop

Use the Christmas budget to enrolyour child in a class or workshop they’re interested in. Whether it’s art, robotics, cooking, or sports, these experiences help children develop new skills and discover their passions. Hands-on learning also builds confidence and provides memories far more lasting than a toy under the tree.

5. Start a family tradition fund

Create a fund to finance meaningful family traditions, such as an annual holiday or special outings. Set aside the money you’d usually spend on toys and instead use it to build memories. For example, $300 could go toward a camping trip, zoo membership, or an adventure your whole family will cherish.

6. Donate to a cause they care about

Teach your child about the joy of giving by letting them choose a charity to support. Sit down together and research causes they feel passionate about – whether it’s helping animals, the environment, or families in need. Giving back can be a powerful way to instill values of empathy and generosity, offering a deeper meaning to the holiday season.

7. Set up a custodial superannuation account

Though retirement may seem far away for your child, starting early with a custodial superannuation account can lead to enormous benefits. Contributing even small amounts early in their life allows compound interest to work its magic over decades. Check eligibility and tax implications in your area, but this can be a unique and forward-thinking way to invest in your child’s future.

This Christmas, consider gifts that go beyond fleeting excitement. Whether it’s starting an investment portfolio, teaching financial literacy with a savings account, or fostering lifelong skills through education and experiences, these alternatives to traditional presents can set your child up for a brighter future.

Explore your options and find the approach that aligns with your financial goals and your child’s aspirations – giving them a gift that keeps on giving.