There are so many factors for a parent to consider in doing their best to make sure their children are prepared for the world when they reach adulthood. A lot of those things will be out of your control, but one thing you can consider that could make a real difference is investing into a Junior ISA.
Entering adulthood with that level of finances comes with life changing opportunities and great freedom of choice. Depending on their priorities, your child could put down a deposit on a property, start a business, pay for training or tuition fees, or even travel the world to their heart’s content.
On April 6th, 2019, the amount that can be saved annually into a Junior ISA or Child Trust Fund account increased from £4,260 to £4,368. Just like an adult ISA, contributions are free from both income and capital gains tax and often come with relatively high interest rates. Junior ISAs are easy to set up and easy to manage: as long as the child lives in the UK and is under the age of 18, their parent or legal guardian can open the ISA on their behalf. On their 18th birthday, the account will become an adult ISA and the child will gain access to the funds.
Both Junior Cash ISAs and Junior Stocks and Shares ISAs are available, and you can even opt for both, but your annual limit will remain the same across both ISAs. When making that decision there are a few considerations to make; cash investments are over a long period of time are unlikely to overtake the cost of inflation but come at a lower risk than their stocks and shares equivalent. With a Junior ISA, however, you can benefit from a long-term investment horizon. Although the stock market comes with a level of volatility, you can ride out some of the dips and peaks over a long period. Combined with good diversification, it’s possible to mitigate a fair amount of risk.
With this latest hike in the saving allowance, it’s time to make the most of Junior ISAs and prepare to swap bedtime reading from Peter Rabbit and Hungry Caterpillar to stories of how a stocks and shares portfolio can secure your child’s future.
The content of this blog is for general information only and should not be considered advice. Information is based on our current understanding of tax legislation. Tax treatment depends on individual circumstances and may be subject to change in the future. Professional advice should always be sought prior to making any decisions or taking any action. The value of investments can go down as well as up in value and you may get back less than you invested. All details were correct at the time of writing.
Reference – Bl060 – Apr – 2019