We all want to find ways of leaving wealth to our loved ones. Cash may be squandered and shares may fall in value but the timeless quality of gold is a perfect, and prudent, token of affection.
According to a recent report by The Institute for Public Policy Research, all 25-year olds should receive a £10,000 ‘inheritance’ funded by the government to address the wealth inequality between millennials and the older generations. Whether or not you agree with this expensive policy, many relatives want to mark their children or grandchildren’s coming of age with a financial hand onto the ladder of adulthood.
Perhaps the most useful gift would be advice, on how to make the best use of their windfall, or just some insight into the arduous job of making money, that will make them appreciate what they are given. But if you’ve ever had to sit an 18-year old down to discuss long term financial security you’ll know they have very little appetite or attention for such pearls of wisdom.
Instead it falls to the gift giver to select something that will retain and hopefully increase its value so that it can be of long term benefit. Typically, a personal investment portfolio includes shares, bonds, some cash, possibly property and gold as a hedge against the other more volatile investments taking a knock. Gift givers might consider any of these, but some are more suitable than others. Legally uncomplicated, private and a proven store of value, gold is deservedly the most popular coming of age gift for loved ones.
India is the largest consumer of gold in the world, primarily because gold is traditionally given as a gift for weddings and religious festivals. It holds particular significance as the symbol of Hindu god Lakshmi, and brides are given gold jewellery as gifts which they wear on their wedding day. Even though the jewellery is often sentimental, it is looked upon as an investment that will retain its value over time.
While India is renowned for its gold gifting, other countries also revere gold and believe it is auspicious to give it as gifts on special occasions. In the UK, unlike premium bonds, cash, equities, ISA’s, houses or cars there is no requirement to register ownership of gold. While gold jewellery is a common choice because it is a keepsake, it isn’t necessarily the best investment option because the young adult may not want to sell it on when they need money to, say, put a deposit on a flat or pay for a wedding.
The Pure Gold Company sells investment grade gold bars and other forms of gold to clients who want to leave their wealth to their loved ones without the risk of it depreciating in the interim. Their clients enjoy the private nature of a gold investment and it means that they can decide to give the gift to a member of their family as they see fit, without the administrative burden of having to re-register the assets. They can oversee the investment before their relative turns 18, and continue beyond that time to safeguard the gold bars or coins if there is a question of the recipient squandering it.
For tax purposes gold coins are a practical investment gift, because certain coins are legal tender and therefor don’t attract capital gains tax. Owning the coins themselves means the recipient doesn’t have to worry about counterparty risk.
Josh Saul, CEO of The Pure Gold Company says: “We have a client who told us that their grandparent had given him and his younger brother a choice: £30 or an ounce of gold. This was back in 1920 when both were worth about the same and could be used to purchase a tailored suit for their weddings. The older brother took the cash and the younger brother took the ounce of gold. In today’s value the £30 wouldn’t cover a neck tie, whereas the ounce of gold is worth almost a £1000. Now that he has grandchildren of his own, he knows he would much rather pass his legacy down in something that will grow instead of depreciate.”
Considering the generational gulf, many relatives or friends will consider giving cash because it offers the most amount of freedom for a young adult to decide what they personally want. But if that turns out to be a few rounds in the local bar or some ephemeral accessory that quickly passes from their memory, there is no lasting keepsake and certainly no money left in the morning.
Shares and bonds
It isn’t straightforward investing shares for someone who is already 18. Prior to coming of age, relatives or friends can open a trust to put money into, manage the investments in the trust, and the investments pass to the child when they turn 18. But once they are of age, investing on their behalf becomes more legally complicated and laborious.
Premium bonds can only be bought for a child under 16 but can no longer be bought in the child’s name when they turn 16. If you wanted to give your relative premium bonds as a coming of age gift you would have to provide them with the cash to make the purchase themselves.
Savings and ISA’s
If you want to save up for a coming of age present over time, parents of grandparents can put savings into their child’s name, but only the first £100 of interest is tax free. This is to stop parents putting their own savings in their child’s name to avoid paying tax on it. Parents can also open a child ISA, which has a £4000 annual savings threshold which is tax free. In both these cases the money belongs to the child on their 18th birthday. Any control is passed directly to them, and there is always the concern that they will squander it instead of using it wisely.
Property and other physical assets
For obvious reasons property is not an option for most people who want to buy a token gift for someone turning 18 or 21 as the expense is prohibitive. But the constant stream of articles about young people having to work for 20 years before they can get onto the property ladder could be a good reason to consider a gift, like gold, that will grow in value and provide the recipient with a little extra for their deposit.
Stamps and other collectibles may also feature on a coming of age shopping list, and they can increase in value over time. But it is not as easy to sell collectibles, and the recipient might not want to because of its sentimental value, negating the investment aspect of the gift.
By giving a loved one gold as an investment, you are handing over control for them to decide if they want to hold onto it or sell it. But while they make that decision they know they own a precious metal that has outperformed inflation and the return on cash, premium bonds and bank savings rates.