I am a proud uncle again. Or rather, I’m more of an uncle than I was.
What I mean to say is my sister has had a beautiful daughter, and my brother already has a splendid son.
Besides being a source of much needed happiness in our family, the arrival of Niece #1 raises an issue I never resolved with Nephew #1 – whether and what to give them to mark the occasion.
Being childless myself it’s news to me, but apparently there’s a tradition of buying newborn children presents they’ll look forward to getting when they’re older.
The fact I don’t remember getting any such present when I was 18 (though I had many nice presents along the way, I stress) makes me wonder if this ‘tradition’ is actually something being foisted upon us by the people who brought us £30 Easter eggs and turned Valentine’s Day into a willy-waving contest (not literally. Well, not always.)
On the other hand, who wouldn’t want to give a present to a splendid little person at the start of their lives?
Time on her side
My niece, like all young people is already rich.
Okay, she’ll need to grow into her looks, having the appearance at the moment of an utterly gorgeous, yet wrinkly and frighteningly tiny Winston Churchill.
But there’s plenty of time for that, and also time for any investment that she (or rather her shrewd uncle) makes to grow, too.
Here in the UK, all newborn children get £250 from the State, which is enrolled in a Child Trust Fund (CTF).
She’ll get another £250 when she’s seven, just for simply growing up.
Nice work if you can get it, Niece #1!
Depending on how her parents invest the money and whether the fund is topped up by them or other family members, she could end up with a tidy sum when she’s 18.
That said, she’ll probably need the money, too, with the cost of going to university perpetually rising, not to mention our stubbornly silly house prices requiring young people to save ever larger deposits.
So one option is to put some money into the Child Trust Fund, and maybe ask her parents if they’d like some help deciding how to invest it.
On the other hand, will a financial statement cause a tear come to her eye when she’s 18? Isn’t it a bit impersonal?
Here are some of the ideas I’ve been knocking around.
My sister isn’t wealthy, and I know she could use the cash with a new baby. But any amount I would give her would soon be swallowed up by the household budget, so there would be no trace of the gift in years to come. Anyway, I’m hardly wealthy myself. Cash was my first thought but I’ve now ruled it out.
While I’ve been pondering what to do, my girlfriend has already sent down some excellent little clothes she picked up at bargain prices while traveling in Eastern Europe (don’t worry — up to European safety standards!)
I have a hunch Niece #1 will outgrow them, however. Also, I hate shopping. Sometimes people buy babies clothes as an excuse to shop, I suspect. Bah humbug.
A musical instrument
I wondered about giving her something like a violin that she could know was there and look forward to learning. Obvious drawbacks are the high initial cost, and that she might not want to learn the violin. It could get damaged in the meantime, too.
A few people have suggested a classic piece of jewelry, like a simple gold chain. Alternatively (and more fun and worthwhile in my eyes) I could buy a little antique piece. This concept has some merit in theory, but in practice I find people rarely like jewelry that’s bought for them as much as they like something they choose for themselves.
Some plastic tat marketed at kids
I ruled this out immediately. There’s enough rubbish going into landfills.
These are a UK Government-run monthly lottery, where you might win a million pounds, or else a variety of smaller prizes. Any winnings are tax-free. They used to be very popular and indeed were a key part of the Government’s debt-raising activities, but last time I looked the expected rate of return was very poor compared to even a cash savings account. And gambling is not a good lesson to teach Niece #1.
Shares in certificate form
I like the idea of giving her 50 shares in, say, a Real Estate Investment Trust, that she could hang on the wall and watch grow over the years. It could spark a passion for investing (and let’s face it, I need more readers).
Holding a single share is risky, however. The paper certificate might not have such sentimental appeal if it’s worthless when she’s 18…
A risky but diversified investment
She’s got at least an 18-year investing horizon. It’s tempting on that timescale to put some money into emerging markets or a tech fund or something similarly volatile, and let it ride out the ups and downs over nearly two decades, especially as I believe markets are still pretty good value right now.
The result could be an excellent return on my initial investment, and more money for her to spend on an 18th birthday bash I’ll be too old and uncool to be invited to put towards a house deposit. And if I choose an interesting asset, we could talk about it as she gets older.
Investing via the Child Trust Fund
This is probably the most sensible idea. The money would grow tax free, and it’d be put together with her parents’ and the Government’s money so there would be no potential awkwardness about the sums involved.
On the other hand, I’d want to put it into shares, whereas her parents may prefer the safety of cash. Worse, if I convinced them to go for shares and the markets went nowhere…
Whole world in her hands
Regular readers will probably see I’m out of my comfort zone here. And nobody will be surprised to hear I haven’t made my mind up yet.
Reading back over what I’ve written, it seems the gift should be:
- Able to benefit from compounding over time
- Personal from me to her
At the moment, I think I’m leaning towards buying some shares in the Templeton Emerging Market Investment Trust in paper certificate form.
She can hang the certificate on the wall, and when she’s grown up and India, Brazil and China are the new superpowers, she can tell her friends she owns a piece of them.
Am I being too money-focused? Should I just buy her a stuffed elephant? Have you ever bought a good gift for a newborn? Any comments appreciated!