How to give kids Christmas gifts that will last a lifetime


Posted at Dec 02 2014 12:19 PM | Updated as of Dec 03 2014 10:03 PM

MANILA, Philippines - For lolos and lolas, saying no to their grandkids is hard to do. As the responsibility of disciplining them no longer falls on the grandparents, they can’t resist to pamper the young ones with expensive toys as Christmas gifts.

But before you splurge and give them items that will hold their attention for a few minutes, hours or at most days, maybe it’s time to consider getting them something more long-lasting.

Nowadays, more parents are forthright in saying that they would prefer the gift of cash that can go towards a college fund for their children. Given the astronomical cost of tertiary education, this makes a lot of sense. Tuition fees in private schools rise by almost 15% every year, and this does not cover miscellaneous expenses such as allowances, books, and related expenses.

If you choose to contribute towards your apo’s college education, not only are you giving something of value to your grandchildren, you are also helping the kids’ parents – your kids – save up for their child’s future.

Although the thought of receiving college funds may not sound very exciting to a child, rest assured that they will definitely thank you for it in the years to come.

The magic of compounding

Don’t think that you need to fork over a huge sum in order to give this type of present. You can start by giving your grandchild (through his parents or guardians) an amount that can serve as a starter fund for his college education. You can add to this fund every year — perhaps during your grandchild’s birthday and during the holidays — while letting the magic of compounding work wonders on the fund. Compounding builds on earnings of an asset's reinvested earnings. Twenty years down the road, when that little smiling baby is a young adult all set for university, that fund that you started will surely serve him well, and will make his parents equally happy.

Just to let you realize the power of compounding, here’s how it works: If you invest P10,000 today at 6%, you will have P10,600 in one year (P10,000 x 1.06). The reinvested P600 grows with the original amount of P10,000. If you continue to earn the same rate of 6%, your investment will grow to P11,236 (P10,600 x 1.06) by the end of the second year. The increase in interest grows each year, as your interest earns interest. The longer you keep your money invested, the more you stand to earn.

If your grandchild is one year old today, you have around 17 years to let your aguinaldo compound. The more time you have, the greater the growth potential. In fact, you can start a fund for your grandchild while he or she is still in utero. Of course, you can put money towards an older grandchild’s education, but the earlier you do it, the bigger its earning potential.

Below are some ideas on how you can give your grandchild the aguinaldo that will last a lifetime:

1. Purchase an education plan.

An education plan gives your grandchild a fixed amount of money to cover college expenses starting at a specified time, usually when he turns 17 years old. Depending on the plan you purchase, the education plan may come with life insurance and accidental death benefits, and a contingency fund should the payor (you) pass away during the payment period of the policy. Premiums are usually payable from 5 to 7 years.

2. Look at high-interest earning savings accounts.

Savings accounts are easy to open for your grandchildren. You can ask the child to come with you to the bank and you can make the initial deposit for him. That will be quite an experience – and a moment to capture using the camera from your mobile phone. Later on, you or other family members can add to this fund.

3. Open an investment account in his name.

There are various entry-level mutual funds or unit investment trust funds that would allow you to put in as little as P5,000. You can add to this every so often, or the parents can also inject additional funds when they can. Of course, you can also put in a much larger amount and allow it to grow over time.

4. Pay attention to the legalities.

Bank accounts for your grandchild will have to be in a guardian’s name, held in trust for your grandchild, until he comes of age. Make sure that this fund is accessed by a responsible adult who will use it for its intended purpose.

5. Make it fun.

Your grandchild might not explode into a dance of joy when he receives an envelope, but there is a way around the initial disappointment. Present your gift imaginatively. Perhaps, you can ask him what he wants to be in the future and tell him that you’ve just given the gift that will make his dream come true.


Grow Your Money is an editorial partnership between and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.

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