Have you still got your Communion money? You’ll give no sharper insight into someone’s attitude to money in this State than by describing them as still having theirs.
Some eight-year-olds will be gifted hundreds of euro in the annual Communion money bonanza in the coming weeks, but is hanging on to it the most constructive thing they can do?
Cash in a card from well-wishing grannies, aunts, uncles, friends and neighbours at Communion time is a national phenomenon. Giving money to mark milestones such as christenings, weddings and communions is common in many cultures. Those making their First Holy Communion in Ireland receive an average of €588, according to an Ulster Bank survey from 2020. More than a quarter of parent respondents said their child had received less than €200 that year, while 6 per cent said that their child received more than €1,000.
There are about 70,000 eight-year-olds in the State, according to Department of Children figures, and 88 per cent attend Catholic schools. If even two-thirds of them received the average, that’s a windfall of more than €24 million headed towards seven- and eight-year-olds in the coming months.
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Today’s child saver is tomorrow’s car loan and mortgage applicant. It’s no wonder banks commission surveys about them.
Stick to tradition?
If it’s interest you want, don’t put your child’s windfall in a credit union. You won’t get interest there, but they do have plenty more to offer.
A Communion windfall was the trigger for TJ (21) to open an account in his local credit union in Co Limerick 14 years ago.
“I’ve had an account there since I was seven,” says TJ . “I’ve been actively using it from when I had part-time jobs when I was 14 and 15 – if I got a bit of money, I’d throw it in there, it’s a great way to save.”
His credit union was a welcoming place, run by members of his community for the community, where family, friends and neighbours saved too.
Now in the first year of an electrical apprenticeship, having a savings track record there has enabled TJ to get a loan for a van.
Interest over time has been negligible, but by putting his money here, TJ became a member-owner. His savings contributed to the loan fund, which directly benefits other members and helps develop the community.
He is reaping the benefits now. Putting up €1,400 or 10 per cent from his own savings, he’s been able to borrow €14,000 from the credit union for a 192 Peugeot Partner van, which he will repay while working and studying over the next four years.
“I’m not sure if having my account there for so long helped,” says TJ. “But anyone my age now who doesn’t have a credit union account is getting one. It’s the best for the loans,” he says.
Rates are similar to the main banks right now, though they might not be as well disposed to giving a €14,000 loan to a young adult unknown to them.
If your child puts their Communion money in a credit union where they save and build relationships over time, it can teach values of community and collaboration. And they might be able to buy a van when they need it.
Deposit options
Your child’s Communion money is unlikely to be a life-changing sum. Put it into the highest interest savings account and the return won’t be either. Still, some accounts are better than others.
A Child Savings Account with EBS right now offers a variable rate of 2.51 per cent. This compares to just 2 per cent with Bank of Ireland and 1 per cent with PTSB.
The account can be opened with just €1 by an adult on behalf of a child aged up to 12 years of age. Regular deposits aren’t required and you can add or withdraw money as you wish. If the balance exceeds €5,000, the interest rate drops.
If you already bank with EBS, you can add the child’s account to your online banking. Otherwise, you may rightly question whether it’s worth getting to grips with another complicated banking app for the sake of the extra interest.
If your child’s Communion lump sum is €500, it will have grown by just €8 after tax after a year on deposit.
Maintain a minimum balance of €50 and after six months, EBS will pay bonus interest of €20. Your total sum after a year will be €521.40.
You can set up an account more quickly using your child’s PPS number and an email address with a neobank such as Bunq. Their Child Account offers 2.67 per cent interest on savings, but it’s only available to parents who are Bunq Core, Pro or Elite customers.
The app is easy to use and your child can log on from their own device. The account comes with the option of a prepaid credit card, so your child can go to the shops without needing to carry cash or a phone. You’ll be instantly notified whenever they make a payment.
Crypto?
Communions can be costly. Clothes, shoes, a family get-together – some parents will have earmarked cash gifts to their child to help cover their own expenses. Those with more latitude could use the money to give their child a practical lesson in the stock market.
Head of financial advice at Moneycube.ie Ralph Benson has enjoyed dabbling with his son.
“My 10-year-old is really into engineering, so we bought shares in Rolls-Royce and we’ve got into a couple of different businesses that are interesting to him,” he says.
“Saying ‘this company makes aircraft engines and you have shares in it’ gives a child a much more concrete example of investing than ‘I bought you a boring fund and you really can’t tell what it does’,” says Benson.
Nike, Nintendo, Manchester United, Disney, McDonald’s, Netflix – let your child pick shares in brands they are familiar with and you can track their fortunes together.
Popular apps such as Revolut enable you to invest in the stock market or buy crypto. A child cannot open a Revolut investment account, but a parent with a free Revolut account can do it.
“You could invest in a small amount of units in a globally diversified fund because you can be sure by the time your child is 17, or 27, the companies leading the charge then are going to be very different,” says Benson.
“Maybe you are investing €300 – if you double your money or half it, you are just going on a journey. It’s not a trust fund.”
The whole process is made easier in the UK where, with a stocks and shares Junior ISA account, money can be invested for a child and they don’t pay tax on capital growth.
“We are just light years behind here and it’s so frustrating,” says Benson. “This stuff is made so difficult to do here and we wonder why people grow up with poor financial literacy.”
Investment account
Opening an investment account with one of the life insurance companies, either in your child’s name or yours, is another option, says Nick Charalambous of Alpha Wealth.
Using this vehicle, the money is invested in different asset classes. Based on an anticipated gross return of 5 per cent a year, after fees, it’s an attractive option and can beat saving in a bank, says Charalambous.
Investing €700 for example in a medium or medium/high-risk diversified fund could increase your child’s savings to an after-tax amount of €829 over five years, or €995 over 10 years, though that will depend on performance.
“If the account is in your child’s name, the contribution and all growth does not form any part of a gift to your child,” says Charalambous.
“The downside is that neither the child nor the parent can access the account until the child is 18 and it’s the child’s money, the parent doesn’t have direct control.”
Long haul
Post Office savings have long been a tradition for Irish families. There are no fees or charges on this type of savings, you won’t pay tax on growth and there is a fixed return but you must keep the money there for the full 10 years to get the benefit.
“Post Office rates had fallen to a low of 15 per cent for the 10-year National Solidarity Bond, which is the best of the accounts, and have since risen to 22 per cent – or 2.01 per cent a year tax free, but it may reduce again as interest rates fall,” says Charalambous.
Invest €500 in this bond at the current 22 per cent rate and after 10 years, your child will come out with a guaranteed €610.
While it takes five minutes to open an account with some of the neobanks, expect to set aside a few hours for a State Savings account.
You must first register as a customer with Ireland State Savings. This requires printing off a paper form and gathering lots of documentation – you’ll need to prove your name with a passport or driving licence, provide proof of address with a utility bill or bank statement from the last six months and proof of your PPS with a letter from Revenue or the Department of Social Protection, as well as your child’s birth certificate and proof of their PPS number.
You’ll need to sign forms and bring all of the documentation to the Post Office, or post certified copies to the GPO. Once they approve your application, you’ll be sent a state savings customer number you can use to apply for the State Savings product.
Pocket money
Despite frequent horror stories where account holders are targeted by scams and fraudsters without getting much support from Revolut, the app continues to be the way many Irish parents give spending money to teens.
[ Is Communion money just a bribe to get people to keep the faith?Opens in new window ]
You can open a Revolut account for a child from the age of six. They probably won’t need it however until they are at least old enough to walk to the shops on their own.
“Revolut isn’t a thing for primary kids here,” says mum of four Linda. Her children have all participated in Communion and were gifted about €350 each.
“The oldest two didn’t spend theirs, they put it in the credit union. The middle guy bought a Samsung tablet and put the rest in the credit union and the youngest bought a Nintendo game and put the rest in the credit union.
“Once they are in secondary school, Revolut is handy to buy energy drinks and food when they are at away matches.”
Kids Revolut accounts come with a debit card on which you can put spending limits.
This story was updated on March 5 to add that Bunq child accounts are available to Pro and Elite customers, as well as Core.
