There are many things that a parent considers throughout their child’s life to ensure they have the best foundations of which to build their future on, whatever that may be. As they get older it becomes apparent that many things are beyond your control as a parent, but one way of making a real, tangible difference is investing into a Junior ISA (JISA). Like always, time is an investor’s biggest friend, and if you start early it is possible to accumulate a pot of over £40,000, a birthday present that no 18 year old would be disappointed with.
Embarking upon adulthood with that level of finances is life changing, and opens up a world of opportunity and adventure. Whether your child uses it to put a deposit down on a first-time home; or go and travel the world; or pay their tuition fees (just about these days!); the possibilities are far-reaching.
From the 6th April 2019, the amount that can be saved annually into a JISA increased from £4,260 to £4,368. Importantly, all contributions into this are free from both income tax and capital gains tax, and generally come with higher interest rates than alternative options. Interest rates can be as high as 3.6% (Coventry Building Society) and many have minimum deposits of just £1. This provides you with flexibility in how much you want to contribute, as long as it doesn’t exceed the £4,368 annually. They are also incredibly easy to set up and organise: your child must live in the UK and be below the age of 18; once your child turns 18 the account will become an adult ISA and the child will gain full access to these funds.
Regarding the options available to you, there is a choice of a Junior Cash ISA or a Junior Stocks and Shares ISA; you can adopt for both as long as you don’t exceed the total limit. Importantly, cash ISAs come at a much lower risk but are unlikely to overtake the cost of inflation. A stocks and share ISA, however, can benefit from a long-term investment horizon. For example, if you invested £100 each month into the stock market for the past 18 years, investment platform Charles Stanley suggest a basic UK tracker fund would have built a pot in the region of £39,313. Comparatively, if this was done in a cash ISA, the figure would be nearer £24,000, a difference of nearly £16,000.
With the increased annual limit coupled with high interest rates, investing in a Junior ISA remains a solid and safe investment option to secure a great start to adult life for your children.