A Junior ISA is a savings account held in your Childs name that you manage on their behalf. When they are 16 they can manage it, however, money can only be withdrawn from a Junior ISA when the child turns 18.
There are 2 types of Junior ISAs:
- Cash
- Stocks and Shares
Cash:
Has an associated interest rate that earns interest on the money in the account such as 1% APR.
Stocks and Shares:
The money in the account is invested into stocks and shares (or funds etc). The money is at risk if the value of the stocks and shares goes down as you may end up with less than you invested. However, over 18 years of a child’s life, the benefits will likely outweigh the risk. If you invest into an index tracker fund, the fund will never value zero as it tracks the performance of a number of shares and the likelihood of every share in the fund going bust at the same time is slim.
Why?
- To have a savings pot to pay for your Childs higher education, wedding, first house deposit, car, business, etc, when the child turns 18
- To set your child up on a path of financial freedom by the time they are 40
- To maximise the money they receive in gifts throughout childhood that would otherwise go on toys they don’t really need.
- Make the money work for them.
How:
Choose a platform
Choose some investments
Set up a regular saver
Pay in any monetary birthday presents, Christmas presents, Easter gifts, Christening gifts, new born gifts, etc.
