If you’re opening a Junior ISA for a child, the first choice is between a Junior Cash ISA and a Junior Stocks & Shares ISA. Both are tax-free. Both lock the money away until the child turns 18. Where they differ is how the money grows, and how much risk comes with it.

This guide explains how each one works, then runs some worked examples so you can see what the difference might look like in pounds and pence.

The quick answer

At a glance	Junior Cash ISA	Junior Stocks & Shares ISA
How it grows	Interest paid by a bank or building society	Investment growth and dividends from funds
Can it go down?	No, the amount paid in is protected	Yes, the value can fall as well as rise
Best suited to	Shorter timeframes, or when certainty matters most	Longer timeframes, where there’s time to ride out ups and downs
Annual allowance	Shares the £9,000 Junior ISA allowance	Shares the £9,000 Junior ISA allowance
Access	Locked until 18	Locked until 18
Tax	No tax on interest	No tax on growth or dividends

A child can hold one of each, so it doesn’t have to be one or the other.

How each type of Junior ISA works

Junior Cash ISA

A Junior Cash ISA works much like a child’s savings account. You pay money in, and the bank or building society pays interest on it. The interest is tax-free, and the balance can’t fall below what’s been paid in.

The trade-off is that growth depends on interest rates. Rates move up and down over 18 years, and if they run below inflation, the money buys less by the time the child turns 18.

Junior Stocks & Shares ISA

A Junior Stocks & Shares ISA (sometimes called an investment Junior ISA) puts the money into funds, which hold things like company shares and bonds. Any growth and dividends are tax-free.

Over long periods, investing has historically had the potential to grow more than cash. But there are no guarantees. The value can fall as well as rise, and you could get back less than was paid in, especially over shorter timeframes.

At The Children’s ISA, our Junior ISA is a stocks and shares Junior ISA, with a choice of Defensive, Balanced, Adventurous and Shariah funds.

Can a child have both an Investment and a Cash ISA?

Yes. A child can hold one Junior Cash ISA and one Junior Stocks & Shares ISA at the same time. The total paid into both across a tax year can’t go over the £9,000 Junior ISA allowance. So you could, for example, put £3,000 into cash and £6,000 into investments in the same year.

You can also transfer between the two types, and between providers, without losing the tax-free status.

Worked examples of how the differences can stack up

The figures below are illustrations, not forecasts. They assume a steady cash interest rate of 3% a year, and steady investment growth of 1%, 4% or 7% a year, all compounded monthly. Real returns won’t be steady: cash rates change, and investments rise and fall from year to year. Charges are not included, and they will reduce investment returns.

Scenario	Total paid in	Cash at 3%	Investing at 1%	Investing at 4%	Investing at 7%
£25 a month, birth to 18	£5,400	£7,120	£5,911	£7,834	£10,523
£100 a month, birth to 18	£21,600	£28,482	£23,645	£31,335	£42,092
£1,000 lump sum at birth	£1,000	£1,702	£1,196	£2,026	£3,380
£100 a month, age 10 to 18	£9,600	£10,817	£9,988	£11,258	£12,702

What the examples show

• Time matters most. Over 18 years, small differences in growth add up. At £100 a month, the gap between 3% cash and 7% investment growth is over £13,000.
• Investing isn’t a sure thing. In the low-growth scenario (1%), the investment ends up behind cash in every example. Real-world returns could be lower still, or negative.
• Later starts narrow the gap. Starting at age 10 leaves 8 years for growth. The difference between cash and investing shrinks, and there’s less time to recover from a fall in markets.
• Lump sums benefit from time too. £1,000 invested at birth has 18 years to grow, so the range of outcomes is wide.

What affects the outcome

• How long the money is invested. The longer the timeframe, the more time there is for growth to compound, and for short-term falls to even out. That doesn’t remove the risk, but time is the biggest single factor in the examples above.
• Charges. Investment Junior ISAs usually have fund and platform charges, and cash Junior ISAs usually don’t. Even small percentage charges add up over 18 years, so check the total cost before choosing.
• Interest rates. Cash returns depend on the rate on offer, which can change. A rate that looks good today may not last for the full 18 years.
• Inflation. If cash interest runs below inflation, the money loses buying power, even though the balance goes up.
• Market ups and downs. Investments can fall sharply in the short term. What matters most is the value when the child turns 18 and what happens to it next.
• What happens at 18. At 18, the Junior ISA becomes an adult ISA in the child’s name, and they take control of it. Some families switch some money to cash in the last few years, so a late fall in markets has less impact.

Do the 2027 ISA changes affect Junior ISAs?

No. From 6 April 2027, adults under 65 will only be able to put £12,000 a year into a cash ISA, out of the £20,000 overall ISA allowance. The Junior ISA allowance is unaffected and stays at £9,000 a year per child, and it has been confirmed at that level until at least April 2031.

So for Junior ISAs, the choice between cash and stocks and shares works the same way as it does today. The government has been open that the adult changes aim to nudge more savers towards investing, which has put the cash vs investing question in the spotlight.

Frequently asked questions

Can you have a cash and a stocks and shares Junior ISA?

Yes. A child can hold one of each at the same time, as long as total payments into both don’t go over £9,000 in a tax year.

Can you switch from a Junior Cash ISA to a Junior Stocks & Shares ISA?

Yes. You can transfer between the two types, and between providers, without losing the tax-free status. Ask the new provider to arrange the transfer rather than withdrawing the money yourself.

Is a Junior Stocks & Shares ISA riskier than a Junior Cash ISA?

Yes. With cash, the amount paid in is protected. With investments, the value can go down as well as up, and you could get back less than was paid in.

What happens to a Junior ISA at 18?

It automatically becomes an adult ISA in the child’s name. From then on, they control the money and can keep saving, keep it invested, or take it out.

Who can pay into a Junior ISA?

A parent or guardian opens it, but anyone can pay in, including grandparents, family and friends. All payments count towards the £9,000 annual allowance.

Can I transfer a Child Trust Fund into a Junior ISA?

Yes. A Child Trust Fund can be transferred into either type of Junior ISA.

Thinking about investing for your child?

The Children’s ISA has offered a stocks and shares Junior ISA since Junior ISAs launched. You can choose from Defensive, Balanced, Adventurous and Shariah funds, and family and friends can pay in too.

Find out more about our Junior Stocks & Shares ISA or learn more about the Children’s ISA.