When it comes to junior ISAs, a small amount goes a long way if it is regularly contributed and withheld until your little one is ready to receive the money. If you start when they are born, you could have a nice little nest egg to gift to your child once they come of age and start looking to put deposits down on houses and pay University fees.
In the 2017/2018 tax year, parents and grandparents can put aside just over £4,128 of tax free money for their child’s future – which equates to just over £300 a month if you have that much disposable income lying around.
However, just £50 a month can see you enjoy £600 in a high interest savings account, which over 18 years amounts to nearly £11,000 – more than enough to get them started in life. These types of Junior ISAs however are restrictive when it comes to access and leave many people tied into a fixed interest rate until the child turns 18.
Junior ISAs usually fall under two categories, cash ISAs and stocks and shares ISAs. Cash ISAs are the safer option in terms of return on your money, while stocks and shares ISAs use money invested to the stock market. Many recommend opting for this ISA if you intend to pay into it over 18 years as it can reap the benefits and have plenty of time to ride out the lows and highs of the stock market.
Once that ISA is ready to go, it’s important all your hard work is not squandered. Ensure your kids understand the true value of the money you’ve put aside and that it is used for something necessary and important. It’s also a good idea to encourage them to set up their own to ensure they always have enough cash set aside for a rainy day.
If they don’t want to use the money straight away some ISAs allow you to move the money into an adult ISA with better interest, but this is something you can check when setting up the account. You will have no control over how they use the money once it is handed over to them at the age of 18, so bear this in mind.
A junior ISA is an excellent idea if you have the extra income to move into it each month, although many will allow you to keep it open as long as there is at least £1 transferred across each month. It’s a good idea to use a comparison site before making your choice to find the best rates.
As well as these junior ISAs there are also plethora of other savings options out there, including standard children’s savings accounts which offer kids the opportunity to use their own money and a cash card to withdraw funds and make purchases – teaching them the value of money and how to spend sensibly. What you opt for depends on your personal situation and preferences but be sure to do your research before signing up.
Good to have clear information and as someone who took an age to learn to handle money because I was so spoiled that way as a kid, I am all for the money managing education aspect