6th February 2023

A guide to Junior ISAs for parents and grandparents

When it comes to saving for your grandchild’s future, a Junior ISA could be a smart option. Whether you’re just starting out or already have investments in place, understanding the basics of a Junior ISA will help you make an informed decision as to how you could help save for your grandchild’s future. 

What is a Junior ISA?

Before we dive into the details, let’s quickly cover the basics. A Junior ISA is a tax-efficient savings vehicle designed for young people under the age of 18. It’s similar to an adult ISA, but there are differences in how much you can invest and how it’s taxed.

Is a Junior ISA the same as a CTF?

You may also be wondering if a Child Trust Fund (CTF) is the same as a Junior ISA. The short answer is no – CTFs are no longer offered as a product and were withdrawn in 2011. They were replaced by Junior ISA’s and are similar in some sense — the money invested in them will stay in place until your grandchild reaches adulthood. A Junior ISA can be opened at any time, and you can switch between different types of accounts to get the most out of your savings.

Benefits of a Junior ISA

Next, let’s consider the potential benefits of investing in a Junior ISA. Junior ISA’s, by the Children’s ISA, are investment ISA’s which means the value of the funds is invested in the stock market.  Recent news of the FTSE reaching its highest rate ever is encouraging, as it suggests that though the UK economy is, potentially, on a downward trajectory, investments remain strong.

Other Options

Of course, there are other options available besides a Junior ISA. Premium bonds and savings accounts, for example, have historically been the go-to vehicle for grandparents who want to help provide for their grandchildren as they grow. When considering these types of investments it is worth bearing in mind that investments tend to outperform cash over the long term, especially when inflation is outpacing interest rates. Here at the Children’s ISA, we have also designed our funds to outpace inflation over the long term and it’s important to remember investing is a long-term game. 

Junior Cash ISAs vs. Junior Investment ISAs

You may also be wondering what the difference between a cash Junior ISA and an investment Junior ISA is. Both are similar in that they offer tax-free savings (up to the annual limit), but with an investment Junior ISA, your money is invested into stocks and shares. This means there’s potential for higher returns, although this also comes with more risk. Ultimately, your decision depends on how much risk you’re comfortable with so we have designed our ISAs with this in mind and offer three risk options defensive, balanced and adventurous.

As a grandparent is it possible to open a Junior ISA for your grandchild? This could be possible if you are the registered guardian but typically the person who needs to open the Junior ISA will be the parent of the child. 

Follow the Journey of a Junior ISA

To sum up, a Junior ISA is an excellent way to save for your grandchild’s future. With plenty of tax-efficient options available, it could be the smart choice for those looking to invest in their grandchild’s financial future. If you would like to know more about our Junior ISA, please feel free to contact us at our Manchester headquarters. 

What more information? Check out our Little Book of Savings.

© The Children’s ISA Ltd 2023. All rights reserved.

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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