As the festive season approaches, what presents are you considering for your children or grandchildren this Christmas?

This year, some of the top contenders on kids’ wish lists include the Hot Wheels F1 Grand Prix Circuit, priced at £80, the Wicked: For Good singing doll available for £35, and the Jurassic World Primal Hatch T-Rex, which costs £65.

For teenagers who have moved beyond toys, a pair of Nike Air Max trainers or a bottle of Burberry Goddess perfume might be more appealing.

Although the joy of receiving a much-desired gift will light up young faces on Christmas morning, it’s often not long before these treasures are set aside and forgotten.

If you’re looking to give something with lasting value, consider making an investment in their future.

Opening a Junior ISA allows parents and grandparents to contribute up to £9,000 annually for their young ones, with the benefit of all returns being tax-free.

Saving Santa: Diligent relatives who invest every Christmas could build a significant nest egg for a child by the time they reach adulthood

The accounts can be opened from birth and the young person cannot access the money until they turn 18, though they can take control of the account from 16, meaning they can choose their own investments.

How quickly will your money grow?

Diligent relatives who invest every Christmas could build a significant nest egg for a child by the time they reach adulthood. 

This money could be used to buy a first car or even help them get on the property ladder with a deposit on their first home. 

Investing £1,000 a year from birth to age 18 could build a savings pot of £33,338, assuming annual growth of 6 per cent. With higher growth of 9 per cent, it could reach £46,904.

Those taking a very long-term approach could consider a children’s pension. You can put up

to £2,880 a year into these accounts, which get topped up to £3,600 with tax relief, and the money cannot be accessed until at least age 57. 

Investing £1,000 a year from birth to age 18, and then stopping all contributions, could create a pot worth £334,593 by age 57, with annual growth of 6 per cent –and a whopping £1.1million with 9pc growth.

Alice Wright, investment director at Canaccord Wealth, says: ‘For families who have a bit of spare cash – or forward-thinking grandparents – putting some money into investments for the kids might be a better use of it than buying the latest PlayStation or Barbie doll.

‘It might not be quite as popular on Christmas morning – but they’ll thank you in the long run!’

Smaller amounts can really add up too. Children whose grandparents had invested for them instead of buying a gift ten years ago could be sitting on a pretty penny by now.

Early start: Investing £1,000 a year from birth to age 18, could build a savings pot of £33,338, assuming annual growth of 6%

Buy the company, not the toy

In 2015, one of the most wanted toys was Pie Face, a game that sees players take turns hoping not to get splatted in the face with shaving foam.

But if you had instead invested the £20 cost of the game in the shares of Hasbro, its manufacturer, you would now have £38. 

That is according to number-crunching by the wealth manager 7IM and assumes that all dividends have been reinvested.

An Amazon Fire Tablet was a must-have item ten years ago, costing about £50. But while Fire Tablets are now obsolete, Amazon shares are anything but – they have since delivered a total return of 668 per cent. A £50 investment in 2015 would have grown to £384 today.

Air Max Trainers were as popular a decade ago as they are today and shares in Nike have done well over that period. Investing the £140 in shares instead of buying the trainers, and reinvesting dividends, would today be worth £181.

In 2015, the iPhone 6 had just been released, costing £539 for the entry-level model. 

While phone users have likely had several new devices since then, shareholders who held on to Apple shares would have enjoyed investment returns of 1,207 per cent. 

If you had invested £539 instead of buying a phone, it would today be worth a staggering £7,045.

The Call of Duty Xbox game was a chart-topper that Christmas, costing about £50. 

But investing the money in Microsoft shares would have reaped far greater rewards. With a total return of 1,026pc, that investment could today be worth £563.

What could your gift grow to?

It depends on how much you have, where you choose to invest, and how long you are able to leave your money to grow.

A £100 investment for a ten-year-old grandchild could almost double to £199 by age 18 or be worth £5,742 by age 57 if invested in a pension.

Chances are that you will accumulate even more in your savings pot – although there is no guarantee and it could be less. 

Money Mail has assumed an annual return of 9 per cent but a fund that tracks the global stock market called the Fidelity Index World fund has achieved an annualised return of 12.96 per cent over five years.

The earlier you start, the more time the money has to grow. If you invest £10 this Christmas for a five-year-old, the money could grow to £30.66 by the time they are 18, or £883 by age 57. 

A £50 investment could grow to £153 by age 18, and £4,417 by age 57, while a £100 investment could be worth £306 and £8,834, respectively.

Ms Wright says: ‘Compounding can transform modest, regular investments into something significant by the time the child reaches adulthood.

‘While they won’t get the immediate excitement of unwrapping a gift, they’ll learn something and take pleasure in watching their investment gift grow.’

Tax free: With a Junior Isa , parents and grandparents can invest up to £9,000 a year for their young relatives

Make choices carefully

Backing companies that young people know, and whose products and services they use, could not only grow their money, but also spark a lifelong interest in investing. 

While it is impossible to know for certain how much shares will grow over the coming years, history tells us that investing in the stock market is a more reliable way to grow your money over the long-term than cash in the bank.

It is important to note that investing in individual company shares carries more risk than investing in a fund that holds many different investments.

This is because you could lose big if the company performs poorly. For that reason, investors are advised to hold a portfolio of shares in companies that do different things and are exposed to different parts of the market.

This means if something goes wrong, they are not all likely to be hit at once.

Parents and grandparents who don’t want to choose individual shares could pick a tracker fund instead which will provide greater diversification. 

This could be a simple MSCI World Index tracker, which follows the performance of thousands of companies across the world at a low cost. The Fidelity World Index fund, for example, is up 83.9 per cent over five years.

Ben Kumar, head of equity strategy at 7IM, says: ‘What makes for a successful present does not always make for a successful investment. 

An Amazon Fire Tablet, with hindsight, was not a great gift, while Amazon shares have been a great investment.

‘While the joy of opening a present lies in the surprise, investors don’t really want surprises so, while diversification might not be a very festive concept, an investment into a well-diversified fund is likely to be the gift that keeps on giving.’

Another option is to choose a fund aligned with the young person’s interests.

Tech-lovers might be interested in the L&G Global Technology Index fund, which invests in the likes of Microsoft, Apple and Meta. 

It is up 155.5 per cent over five years. Instead of buying jewellery, you could invest in the iShares Physical Gold ETC, which tracks the price of gold and is up 131 per cent over five years.

Green-minded young people might find interest in a renewable energy fund which invests in wind turbines, solar panels and battery storage units. 

The Foresight Environmental Infrastructure trust, for example, owns a portfolio of assets across Europe but mostly in the UK, including solar farms in Basingstoke and Cornwall, and onshore wind farms in Newark and Scotland. 

The trust is down 12.4 per cent over five years, but up 1.3 per cent over the past 12 months.

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