For families seeking ethical savings options that align with specific principles, Shariah-compliant Junior ISAs offer an alternative approach to traditional savings accounts. Here at the Children’s ISA ethical invested, Shariah-compliant Junior ISAs have become a popular choice for parents looking to secure their child’s future in a way that respects Islamic guidelines. Below, we answer some key questions for those considering this unique type of Junior ISA.

What Makes a Junior ISA Shariah-Compliant?

A Shariah-compliant Junior ISA adheres to principles rooted in Islamic law, ensuring that investments meet certain ethical standards. This means funds are invested in ways that avoid industries like alcohol, gambling, and tobacco, which may not align with Islamic values. Additionally, Shariah-compliant investments avoid companies or industries that generate income through interest-based lending or high-risk speculation.

This structure provides peace of mind to families looking to invest in a way that reflects their values, with a focus on sustainable and socially responsible sectors.

How Do These ISAs Compare to Traditional Junior ISAs?

The primary difference between Shariah-compliant Junior ISAs and traditional Junior ISAs is the type of investments allowed within each. While traditional Junior ISAs may hold a broader range of assets, Shariah-compliant ISAs only include investments that meet Islamic principles. However, both types offer the same tax-free benefits up to the annual allowance and provide the same flexibility in terms of choosing between a Cash ISA or a Stocks and Shares ISA.

A Shariah-compliant Junior ISA can provide an appealing option for families who prioritise ethical investing, whether or not they follow Islamic principles.

Are There Options for Ethical Savings Beyond Shariah-Compliant Junior ISAs?

In addition to Shariah-compliant Junior ISAs, there are other ethical savings options for parents interested in socially responsible investments. Many Junior ISAs now offer portfolios focusing on sustainability and environmental responsibility, with investments screened against certain ethical criteria. For instance, here at the Children’s ISA, we have partnered with Eden Tree Investment Management, a leader in socially responsible investing since 1988, to offer an Ethical Fund option that combines profit with principles.

What Should Families Consider When Choosing a Shariah Junior ISA?

Families considering a Shariah-compliant Junior ISA may want to look at factors like management fees, investment options, and the historical performance of the fund. As with any investment, it’s also helpful to explore the specific screening process used by the provider to ensure it aligns with Shariah principles.

Can a Shariah-Compliant Junior ISA Also Offer Growth Potential?

Yes, Shariah-compliant Junior ISAs can indeed offer growth potential, similar to other Stocks and Shares ISAs. These accounts allow contributions to be invested in a diversified portfolio that complies with Shariah principles, often focusing on industries with sustainable and steady growth prospects. While Shariah-compliant investments may exclude certain sectors, they still offer a balanced mix of options, from tech and healthcare to energy and real estate, depending on the provider’s approach. The growth potential will vary based on market performance and the type of assets within the fund, but as with any investment, a Shariah-compliant Junior ISA can be a great investment over the long term.