Financial products make lucrative stocking fillers

Instead of giving the unimaginative gift of money, consumers can choose a range of investment options that will reap monetary rewards in the future, writes Laura Slattery

It's an age-old dilemma for shopping-phobic anti-consumers, generous but time-pressured workers and benevolent relatives alike: how to give money without seeming crass and unimaginative.

According to research conducted by the Gift Voucher Shop, sales of vouchers in Ireland have reached an all-time high - to a market value of €270 million.

The average value of gift voucher sales in post offices is now €70 it claims, with internet and telephone orders having an average value of just over €40.

But even if gift vouchers seem too much like hard currency, there is a range of financial products that easily slip into Christmas stockings and continue to reap monetary rewards for years to come.

Savings accounts

Parents, grandparents and other relatives typically pick birthdays or Christmas to kick-start savings accounts for children.

After all, it might be a good idea if their kids have the consolation of a financial lifeline to cling on to once this year's Bratz dolls have been defaced and remote control cars have made their final U-turn.

Most banks include a money box and a deposit book with their child savings accounts.

For kids who already have piggy banks coming out of their ears, AIB offers something called a Creative Coins Journal, while under-12s who open UR First Account at Ulster Bank receive an "I started saving today" certificate with their polaroid photo affixed.

Children aged seven and over can make withdrawals from an account, otherwise a parent or guardian must do so on their behalf.

Another traditional way for adults to encourage savings habits in children is to buy savings certificates or bonds from An Post.

The certificates, which require a minimum investment of just €50, have a fixed term of five years and six months, while the bonds last for three years.

The interest paid on these State-guaranteed products is 16 per cent over the full term for the certificates and 8 per cent for the bonds, not the highest rates around on an annual basis, but they do have the advantage of being tax-free.

Prize bonds

Another financial gift that comes with State backing, prize bonds are like a permanent lottery.

Bondholders are eligible to win not just once, but in each weekly draw, and the weekly tax-free prizes range in value from €75 to €20,000, with a monthly jackpot of €150,000.

The bonds can be purchased in units of €6.25 each, with a minimum purchase of four units, or €25.

Prize bonds can be bought online at www.prizebonds.ie, by telephone or at post offices.

The bonds are also much less of a gamble than the lottery in the sense that they can be cashed in at any time, after a holding period of three months.

The only risk is that the longer that they are held, the more likely that their cash value will have depreciated thanks to inflation.

Exchange traded fund

Buying shares as a gift for other people can be tricky. Not only can stockbrokers' fees and commissions make it expensive to buy small gift-sized amounts of stock, but the buyer could end up looking red-faced if the one stock they have chosen for their loved one crashes the first day markets open after Christmas - especially if they had previously claimed some kind of expertise in the stock market game.

One way round this problem might be to buy shares in the Irish Stock Exchange's exchange traded fund (ETF).

Launched earlier this year, it gives investors diversification in a single, low-cost transaction. Through the ETF, investors can place their bets on the 20 most liquid and largest capped equities on the Iseq index, without having to fork out for the fees, commissions and stamp duty that would apply if they bought each share individually.

Some €28.4 million has been invested in the Iseq ETF to date. ETFs also exist in other markets for those not satisfied with the prospects for the Irish market.

There will still be costs, paperwork and potential gift tax implications, but despite these complications, an ETF could be a good, and not overly adventurous, way to introduce a willing friend or partner to the highs and lows of share investing.

Oneshare.com

Parents who want to give their kids a finance-related gift that's a bit more cutting edge than a humble savings account might try the Californian-based site Oneshare.com, a hugely uneconomical but potentially fun way to give budding capitalists a taste for buying shares.

Oneshare.com says its My First Stock package is a "fun, lasting gift that teaches kids about stocks and investing".

A certificate for a single share from a US-listed company, including toymakers Hasbro and Mattel, is framed and comes with an investment book for kids and a special mat.

The exact price will depend on the stock selected, but in most cases, once delivery is included the package will cost over $100 (€85).

Something gold

The December overload of glitter may be a little harsh on the eyes, but for adults with an eye on the investment markets, some sparkly solid gold could be appreciated come the 25th.

Gold has shot up in value this year, with prices reaching their highest level in 25 years, thanks to demand from Asian economies and investors seeking to protect their wealth from the inflationary effects of a weak dollar and rising oil prices.

Jewellery may be the thoughtful, romantic way to give gold, but as a cold-hearted investment option, it can take many forms.

Investment bonds offering exposure to gold alongside other commodities are now reasonably common, although the minimum investments required can be high.

There is also a market in gold coins, both the scarce pre-1933 kind and the modern bullion coins.

The most popular bullion coins for investors are one-ounce coins and grandparents sometimes buy these for their grandchildren, according to Dublin-based precious metals brokerage, Gold Investments.

Bullion bars are generally better value than coins because they have lower manufacturing mark-ups.

Either way, gold is not that cheap as Christmas gifts go. Gold Investments requires a minimum sum of €2,000 if the investor wants to store the gold themselves and €3,500 if they want it held on their behalf in a secure storage depository.

If that's beyond their budgets, stumped gift-givers can always console themselves that frankincense and myrrh are somewhat cheaper.

Something green

It might seem like half a forest is on sale outside your local petrol station at this time of year, but trees are generally thin on the ground in Ireland.

Only 10 per cent of the country is covered with trees, compared with a European average of 36 per cent.

As part of the Government's campaign to increase the percentage of land under forest cover, profits from investments in forestry are exempt from tax.

Buying a share in a forestry plan operated by a company called Irish Forestry Services (IFS) can be done for the sum of €750 per share.

The latest plan has just closed, however, the company is taking enquiries for its next plan. A handful of shares in older plans are also for sale.

The plans invest in semi-mature forestry and bare land that will be planted utilising EU and Government grants.

After a 10-year term, the plan will be wound up and the afforested lands sold on the open market, with any profits distributed to shareholders.

The projected tax-free return is 8.5 per cent per annum, although as the IFS plans don't mature until 2010, this return is not guaranteed.

A bottle of red

Fine wines from the top châteaux in the Bordeaux region of France have a steady history of increasing in value, making them a potentially savvy investment option - as long as they're not cracked open prematurely.

The best investment returns on wine are available over a 10 to 15-year period, so if you are planning on giving an already expensive but hopefully appreciating bottle, make sure the recipient already has plenty of cheap plonk handy to get them through the Christmas season.