A Junior ISA (JISA) is a hassle-free – and tax-free – way to invest in your child’s future.
As a parent or guardian, you open the account for your child, but it also allows other family members or friends to help them save or invest. This could be for their university education or that first home deposit, with the money you invest growing as the years roll by, although investments can fall as well as rise in value.
By the time your child is 18, they will be able to withdraw and enjoy all the benefits that long term investment can bring – or it can be kept on as a standard adult ISA to aim for further returns.
How to invest your child’s money for their future
The first decision to make is what you are saving for, and the likely timeframe. This will, to some extent, dictate the type of investment you choose. Investments for children generally have time on their side, so taking on the risk and volatility of the stock market in pursuit of higher returns is worth considering.
Leaving money in cash is the lowest risk approach. It provides little return, but it does have the important advantage of keeping capital secure. However, cash is unlikely to grow fast enough to keep up with inflation (the increase in the cost of living), especially over long periods.
The main other types of assets – equities, bonds, property and so on – each have different characteristics, but unlike cash, all can fall as well as rise in value to a greater or lesser extent. History shows that over the long term, equities (representing shares in individual companies) is the most volatile asset class but has also provided the best returns.
1. Find the best Junior ISA for you
Once you have considered which asset class is appropriate for your needs it is time to look at how to invest. One option that is notable for its tax-efficiency and flexibility is a Junior ISA.
Junior ISAs are a popular way for family and friends to build up tax-efficient savings and investments for a child. The tax benefits are the same as an adult ISA – no capital gains tax, and no need to pay tax on any income. Withdrawals are possible from the age of 18 when it automatically converts to an adult ISA, meaning the pot can be useful to help with the cost of university or a deposit for a house.
A parent or legal guardian of an eligible child can open a Charles Stanley Direct Junior ISA online, manage the account and make the investment decisions. Family friends, relatives, and grandparents can’t open a Junior ISA unless they are the child’s legal guardian – though they can contribute at any time up to the annual investment limit, which this tax year is £9,000 per child. Please note Charles Stanley only provides Junior Stocks & Shares ISAs and not Junior Cash ISAs, which are a type of savings account provided by banks and building societies.
The key benefits of the Charles Stanley Direct Stocks & Shares Junior ISA:
- No set-up costs and competitive charges
- Easy to manage
- Flexible – contribute lump sums whenever you want or a monthly amount of £50 or more
- Wide investment choice
- Award-winning customer service
- Transfer in existing Junior ISAs or Child Trust Funds.
2. Find and transfer any existing holdings
You can transfer a Junior ISA to another provider at any time, as well as turning your Cash JISA into a Stocks & Shares JISA. If you or your child has an existing Child Trust Fund, you can track this down and notify your provider of the switch.
It’s important to note you can’t withdraw money from a JISA until your child turns 18. When this happens, their JISA account will change into an adult ISA – either a cash or investment ISA account, depending on what you had originally.
3. Manage your investments
Our JISA is flexible and easy to manage - you can contribute ad-hoc lump sums or a monthly amount via direct debit of at least £50. There is also a wide investment choice, including thousands of funds, investment trusts, exchange-traded funds (ETFs) and shares.
If you are not sure where to invest, our Preferred List of funds selected by our research team could provide you with a starting point for your own research. Alternatively, if you would rather be a ‘hands-off’ investor, Charles Stanley’s range of multi asset funds could provide you with a great value, professionally managed portfolio in one easy-to-buy investment.
Starting early could make a huge difference to the savings your child can accumulate in a Junior ISA, and regular small amounts can add up over time. If parents put away just £100 a month from birth this could result in a sum of £34,666 at age 18 (assuming growth of 5% a year after charges).
4. Consider responsible investing
Increasingly, people want their investments to do more than make money. Fortunately, there are ways to marry profit with principles.
Responsible Investing is an umbrella term for approaches to investment that consider non-financial factors such as the environment, social aspects, ethical values, sustainable themes and/or engagement efforts. The aim of responsible investing is to combine better risk management with improved portfolio returns, and to reflect investor values in an investment strategy.
Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.
Learn more about our Junior ISA
Save for your child’s future with our tax-efficient Junior Stocks & Shares ISA and give them a financial head start.
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