Choosing an investment vehicle for a child can seem like a daunting and overwhelming task. The potential returns for the child you are investing for could be an important nest egg for them. But what are the options available to you? And what are the pros and cons? We’ll answer some of the questions people often ask about investing on behalf of a child.
First, it is important to understand the types of Junior ISAs available. Junior Cash ISAs tend to be more straightforward products that rely on bank interest rates for returns, whilst Junior Stocks and Shares ISAs can offer more significant growth potential but come with higher risks. Junior Investment ISAs (JISAs) are also referred to as Junior Stocks and Shares ISAs, and these provide a tax-efficient way for parents, guardians or friends to invest money on behalf of children.
What is better a Child Trust Fund or a junior ISA?
Child Trust Funds (or CTFs) no longer exist. Junior ISAs superseded CTFs in 2011 but work in much the same way. Junior ISAs offer a tax-free way of investing for children. Remember there are two types of Junior ISA, an Investment JISA and a Cash JISA.
ISA junior stocks and shares ISA a good idea?
JISAs can offer a great way to plan for your child’s future. Junior ISAs are tax-free and allow the money invested to grow in line with markets, meaning that you can benefit from any growth in the stock market over time. It is important to note, however, that they come with higher risks than Junior Cash ISAs. Like all investments, the value of the funds in your account can go up as well as down.
Can you lose money in a junior ISA?
The value of Junior ISAs can go up as well as down, so you should bear this in mind when making an investment decision. The amount of money invested may not always be the same amount that is returned to you or your child when the Junior ISA matures. Based on historical figures, however, returns from a Junior ISA from the Children’s ISA will out perform cash over the long term. Check out our calculator here to see what potential returns your child could achieve when they turn 18.
Is a Junior stocks and shares ISA the same as a savings account?
No, Junior Investment ISAs (JISAs) are not the same as Junior Cash ISAs or Junior Savings Accounts. Junior Cash ISAs and Junior Savings Accounts are lower-risk investments that offer more straightforward returns based on bank interest rates. Junior Investment ISAs, however, can significantly outperform Junior Cash and Junior Savings Accounts over time.
Is an investment Junior ISA a good idea during a period of high inflation?
When inflation is high, central banks usually respond by increasing interest rates. This means that the value of cash stored in a bank account (like a savings account) increases but it generally won’t outpace inflation. Generally speaking, periods of high inflation are often the best time to invest. Predicting the future is a challenge. However, over the long term, placing finances into an investment will outstrip inflation.
If you are looking to start your Junior ISA investment journey in 2023, we hope you found this article useful. Remember Junior ISAs are a great way to invest in your child’s future, but you should carefully consider the risks before investing and none of the above should constitute advice. For more information about Junior ISAs from The Children’s ISA, get in touch with one of our friendly team at our Manchester head office.
The website and the information contained therein should not be regarded as an offer or solicitation to conduct investment business in any jurisdiction other than the UK. Past performance is not necessarily a guide to future performance and the value of your investment may fall as well as rise, and any income received in the form of dividends may fluctuate. You may not get back the full amount when the account is closed. If paying regular monthly contributions please bear in mind that if contributions are not maintained you will be less likely to achieve the investment amount that was originally projected.
The information on this website is not advice, it is provided solely to enable you to make your own investment decisions. The investments and /or investment services referred to may not be suitable for all investors.
The Children’s ISA Limited is authorised and regulated by the Financial Conduct Authority. (FCA No: 563043)
The Children’s ISA Limited is a company registered in England and Wales. Registered Company Number: 07486015
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