There is no parent who does not want the best for their children. Many go to great lengths to secure the future of their children opening trust funds and buying houses for their children. Don’t worry if this is something you cannot afford currently or in future, there are ways to still save for your child and have that money grow to (the power of compound interest and good portfolio management).
The time for gifting piggy banks for your children has probably passed with the use of Junior Individual Savings Accounts (JISAs). We will take you through the basics of what you need to know about Junior ISAs.
What is a Junior ISA?
A junior ISA is a savings account made for children. Much like the adult ISA, any gains or interest paid from investments in a junior ISA. That means that these savings accounts are completely tax-free and no income tax or capital gains tax is charged. Junior ISAs are available to children under the age of 18 who live in the UK. The only exception to the requirement for the children to be living in the UK is for Crown servants in the UK armed forces, diplomatic service or overseas civil service.
Types of Junior ISAs available
1. Cash Junior ISAs
These function just like a bank account in that you keep your money in cash and earn interest on it. These are the safest kind of JISAs as all your money is held in cash. However, these tend to attract very little returns as bank interest rates are often low within the 1% range.
2. Stocks and shares Junior ISAs
With the stocks and shares JISAs, you are able to invest in shares or equities ,as well as portfolios built with mixes of asset classes such as bonds and property.
How much can I invest in a JISA for my child?
You can invest up until £4,260 for your child in this account per year. If you do not make use of the allowance in this year, it lapses and you cannot contribute more than that to the account.
Can I withdraw out of the account?
Once you open the account for your child, the money belongs to them. You cannot withdraw any money from the account until your child turns 18. However, your child can retain control of the account at age 16.
Can I open both a JISA and an ISA for my child?
Before the child turns 16, you can only open a JISA for them. However, between the age of 16 and 18, your child can have both a JISA and an adult cash ISA. This means that if you have a 17 year old child now they can contribute £4,260 into the JISA ,as well as an adult cash ISA contribution of £20,000 as per the maximum allowable contribution.
How do I open one?
Impulse Plan offers cost-efficient stocks and shares Junior ISA accounts. Our portfolio selection features 10 risk based portfolios with funds from Close Brothers, Seven Investment Management, Goldman Sachs Asset Management, SEI, Schroders, UBS and Allianz Global Investors. Email us on claire@impulseplan.com or call us on 01344 888 785