Your little ones might be watching Dora the Explorer and falling asleep with a teddy bear these days, but time flies by very fast and it won’t be long until they are graduating from school and starting out on a life of their own.
With Junior ISAs you have an opportunity to save money in a tax-free investment account throughout your child’s life so that they can use it when they are older. The money that you save in a Junior ISA earns interest and it is not eligible to be withdrawn until your child reaches the age of 18.
How Do They Work?
The Junior Cash ISA works in a similar way to a children’s savings account, allowing you to save up to £3,600 each year tax free. You will earn interest on the savings at no risk to the money and you will not need to pay tax on interest. There is also the option for Junior Investment ISAs which will allow you to make investments for your child. Management fees will apply to this type of account.
Once your child reaches the age of 16 they will be able to manage their own Junior ISA and once your child becomes 18 they will be able to withdraw the money and spend it as they wish.
Tips for Managing a Junior ISA
If you are planning on using a Junior ISA to save for your child’s future, here are some tips for managing the account:
- Look out for accounts which have high Annual Management Charges as these can be a significant drag on the performance of your investment.
- You will have many choices for how you make your contributions, so think about which would be the most advantageous. For example, do you want to pay in a lump sum or save on a regular basis? Once you have determined this, look for accounts which suit the way that you will want to save money for your child.
- Search for a Junior ISA account which rewards your long term investment with a loyalty bonus.
- Your child can hold one Junior cash ISA and one investment Junior ISA at the same time, as long as the total money contributed into the two does not exceed the yearly limit of £3,600.
- If you have chosen a junior investment ISA for your child you can choose to manage your investments on your own or have a professional manager take care of them for you for a fee.
These are just a few important points to keep in mind when you are managing your child’s Junior ISA.
If you are choosing a junior ISA to save for your child’s future, here are some tips to keep in mind when managing this long term savings and investment account.