For grandparents looking to contribute to their grandchild’s future, a Junior ISA (JISA) could be a powerful tool. While grandparents cannot open a Junior ISA directly — only parents or guardians can do that — there are ways to play a significant role in building up this tax-efficient savings pot. This article explores how grandparents can encourage family contributions, the impact of regular payments, and the importance of helping the younger generation build a nest egg amidst an uncertain future. 

Understanding the Junior ISA

A Junior ISA is a savings or investment account available to children under 18. It allows for annual contributions of up to £9,000 (for the financial year 2024/25), with any growth free from income and capital gains tax. Junior ISAs come in two types: Cash JISAs, which earn interest, and Stocks and Shares JISAs, which invest in the markets and offer the potential for greater returns over time – much like a pension. Though grandparents can’t open a Junior ISA for their grandchildren, they can encourage the parents or guardians to set one up and contribute to it. This approach enables grandparents to still be actively involved in their grandchild’s financial planning while taking advantage of the JISA’s tax benefits and potential for long-term growth.

How Grandparents Can Contribute

One of the most effective ways for grandparents to support their grandchild’s Junior ISA is through regular contributions. Even small monthly deposits can add up over time, especially when invested in a Stocks and Shares Junior ISA that has the potential for compound growth. You can use our calculator here to see how a nest egg could grow over time, based on historical performance. To make contributions more seamless, some families set up standing orders directly into the Junior ISA account. This way, grandparents can steadily contribute without needing to remember each month. Even occasional contributions, such as birthday or holiday gifts, could make a big difference over time. 

Encouraging a Family Approach to Saving

Beyond direct contributions, grandparents can play a key role in encouraging a family-wide approach to saving. Open conversations about the importance of saving for the future can help younger family members understand the value of planning ahead. By explaining the benefits of the Junior ISA, grandparents can inspire parents to prioritise regular contributions, making it a family effort.

Grandparents could also introduce the idea of ‘saving challenges’ or special events where the family rallies together to contribute to the child’s JISA. This not only boosts the savings but can also instil a sense of financial responsibility in the child as they grow older.

The Bigger Picture: Intergenerational Wealth Gaps

Supporting a grandchild’s Junior ISA takes on added significance in light of the changing economic landscape. Today’s younger generation faces challenges that their grandparents’ (and parents’) generation may not have encountered, particularly when it comes to building wealth.

Consider, for example, the difference in property affordability between 1974 and 2024. In 1974, the average UK house price was around three times the average salary. Fast forward to 2024, and that figure has increased significantly, with the average house price often standing at over six to seven times the average salary, especially in the South East. This shift has made it much harder for younger people to save for major milestones, like buying a first home or building a solid financial cushion. By contributing to a Junior ISA, grandparents can help bridge some of this gap, giving their grandchildren a head start in a world where financial independence can be more difficult to achieve. 

The Long-Term Impact of a Junior ISA

The benefits of a Junior ISA go beyond tax efficiency. It’s a way to teach children the importance of saving, investing, and thinking about their financial future. When the child turns 18, the Junior ISA converts into an adult ISA, giving them control over their savings. This lump sum could be used for various purposes, such as university fees, a deposit for a first home, or even further investments.

For grandparents, knowing that their contributions have the potential to positively impact their grandchild’s future can be incredibly rewarding. It’s a way to pass down not just money, but values around saving and financial responsibility.