Times are tough. The global economy is in a state of flux and stock markets are volatile. So, it might seem like the wrong time to invest in a long-term savings vehicle like a Junior ISA – but that’s exactly why you should. Even though markets may be turbulent over the short term, they will recover over the long term. And, when they do, you’ll be glad you have your Junior ISA invested in them. In this article, we’ll explore why it pays to continue investing in a Junior ISA – even during difficult times.

Many investment vehicles like a Junior ISA (and pensions) are invested in the stock market. In tough times it is natural for many people to want to re-trench their spending, including investments.  After all, who wants to see their savings lose value? But, it’s important to remember that the stock market is a long-term investment. Over the long term, it has always grown – despite the occasional dip caused by external macroeconomic factors.

For example, since 1995 the FTSE 100 index of leading UK companies has more than quadrupled in value.  And, even during the global financial crisis of 2008-09, it only fell by around a third in value – before starting to recover and grow again. So, if you’re thinking about reducing spending on an investment, like a Junior ISA because of short-term market volatility, remember that you’re likely to miss out on the long-term growth that they can deliver.

Another benefit of long-term investments is compound interest.  This is when the interest you earn on your savings is reinvested and starts to earn interest itself.  This process begins to accelerate over time, as your savings grow. So, even if stock markets could be going through a tough patch, compounding interest can help your money to continue to grow. 

Of course, it’s important to remember that investments can go up as well as down.   So, you could get back less than you originally invested.  But, if you’re investing for the long term – for example, to help pay for your child’s education or a deposit on their first home – then market volatility is unlikely to impact your plans. Another feature of our current market conditions is inflation. However, the Children’s ISA is launching a range of funds which are designed to shield your child’s investment from inflation over the long term.

Investing in a Junior ISA is a long-term commitment.   But, it’s one that can be hugely rewarding – both for your child and for you as their parent or guardian.  So, even in these difficult times, don’t forget to keep investing in their future. Please feel free to contact us at our Manchester office if you have any questions.