How a Junior ISA can help prepare for your child's future
PUBLISHED: 09:55 21 November 2016 | UPDATED: 16:53 21 November 2016
Instead of buying presents that aren't enjoyed, why not gift money into a Junior ISA to prepare for your child's future?
Have you ever spent ages tracking down the must have children’s toy only for them to be more interested in the cardboard box or for it to lie forgotten just a few weeks into January? A recent survey from Halifax found that parent’s spend an average of £177 per child on Christmas presents up to the age of 18, which is a whopping £3,186 in total. If this was instead placed in a savings account it would build up to £4,720 after 18 years.*
That is not taking into account the amount spent on children by grandparents, other relatives and family friends. This Christmas why not consider making a financial gift to a saving account such as a Junior ISA?
With the average price of a deposit in 2016 being £55,000 and university costs coming in at approx. £17,500 a year, it should be considered essential to start putting money aside for your child’s future.
We aren’t suggesting that you stop buying presents altogether, instead consider cutting back on how much you spend on presents and as an alternative gift money to a Junior ISA to give them a really valuable gift for the future.
What is a Junior ISA?
A junior ISA is a tax free savings account for children up to the age of 18 who live in the UK. It must be opened by either the child’s parents or legal guardian.
While the money in the account belongs to the child, they are unable to withdraw any of it until they reach the age of 18 however they are able to start managing it from the age of 16. The current limit for the tax year 2016/2017 is £4,080 and this sum can be made up of donations from parents, family and friends. If more than the annual limit is put into a Junior ISA the excess will be held in trust in a savings account.
Once the child turns 18 the account is automatically transferred into a regular ISA and the child is able to manage and withdraw the money themselves.
Types of Junior ISAs
Just like adult ISAs there are two types of Junior ISAs – Cash or Stock & Shares.
A Cash Junior ISA may be the preferred option for those that are only saving for a short amount of time, for example under 5 years.
However if you are investing for the long term, over 5 years, then a Stocks & Shares Junior ISA could be a better option as they can offer a better rate of return. However it is important to remember that there is a higher risk attached to these as investments can fall and rise.
If you would like to find out more about Junior ISAs and help finding a plan suitable for you then please contact KDW, who can provide Independent Financial Advice and will be able to discuss your options.
Past Performance is not necessarily a guide to future performance, the value of investments and the income from them can fall as well as rise and you may not get back the amount originally invested.
*Parents spend over £3,000 on Christmas presents per child up to the age of 18, Halifax, 25th November 2015