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Today on the blog I’m welcoming Jim Gall, author of moneyblogscotland.co.uk. Jim has recently left a job in financial services, so he knows his stuff! If you’re looking into savings for your children, this post is perfect. Here’s Jim’s post on how to save into a JISA (Junior ISA).
Make the Most of Tax-Free Savings and Compound Returns
Are you interested in putting something away for a child but not sure where to begin?
There are numerous options available to parents wishing to build a nest egg for their children.
However, the one that I am going to explain in this article is the Junior ISA.
It’s the children’s savings vehicle I am most familiar with, as I have three children, all of who have their own junior ISA account.
What Do Junior ISAs Offer a Saver?
As with all child savings account, the returns are tax-free. This means the child does not pay tax on any gains made on the account.
To protect the fund, the money is locked away. The money is the property of the child, and cannot be accessed until the child is eighteen. Although the child can take over management of the account when they are sixteen
How to Get Started – Understand the different types of JISA
There are two versions of Junior ISAs, the Cash JISA and the Stocks and Shares JISA.
- A Cash JISA is a savings account which accrues interest much as a bank account will.
- A Stocks and Shares JISA is an investment account which allows you to invest your child’s money in the stock market.
With a Cash ISA, interest rates are currently very low, but they could go up over time.
With a Stocks and Shares JISA, there is more potential for growth although that also comes with risk, as the value of your child’s fund could go down as well as up and you could get back less than you pay in.
How Much Could a Junior ISA Earn?
That is dependent on a number of factors including; the amount you pay in (monthly premium or lump sum payments), the growth rate or interest rate of the account, the charges that you pay the provider for the plan and number of years invested.
Which provider to choose?
A place to start might be on a comparison website such as MoneySupermarket. These websites showcase a number of JISA providers and give key takeouts on each product.
However, this isn’t a league table of the best plans available. The providers get placements here by paying comparison sites to promote their products.
So you are not necessarily getting the best deal if selecting a plan from a comparison site..
If you are opening a JISA for your child anyway, some providers provide a cashback incentive. You can see a list of them on Quidco and Top Cashback.
Again, be aware that the value of your cashback is, more than likely, built into the plan charges.
Check the Charges
With a long term saving or investment product such as a Junior ISA, charges can have a really big impact on the final value of your child’s fund.
A half percentage point of a difference could make a difference of hundreds or even thousands of pounds to the final value of a long-term Junior ISA plan.
Again, check out the JISA calculator which is mentioned above to see the effect that charges can have on an investment.
Make sure you take note of the plan charges before beginning an investment. They will be specified in the Key Features Document which you should read as part of the application process.
It could be a good idea to compare different providers charges before making a decision.
Lastly, I am not a financial adviser and do not offer advice. This article is for informational purposes only. If you are seeking financial advice, you can visit unbiased.co.uk where you can find details of financial advisers local to you.
Thanks so much for sharing that information with us, Jim. I especially like the idea of using a cashback website when opening a junior ISA! If you want to find out more information about Jim Gall and his blog, visit him at moneyblogscotland.co.uk.