We know that most parents would like to save for their children’s future.
Whether that may be to help with the cost of university fees, their first car or deposit on their first home, that’s where a Junior ISA can help.
What’s a Junior ISA?
Junior ISAs are a new tax-free savings account for children designed for families to help save for their children. They offer parents a great way to save for children who don’t have a Child Trust Fund (CTF) and Junior ISAs aim to provide parents with a simple way to save for their child’s future.
Eligibility for Junior ISAs
Junior ISAs are available to all UK resident children aged under 18 who:
- Don’t have a Child Trust Fund, and were
- Born on or after 3 January 2011, or
- Born before September 2002.
This means that no child need miss out on the chance on having a lump sum available to help them into adult life at age 18.
Types of Junior ISAs
Each child can hold up to one cash Junior ISA and one stocks & shares Junior ISA at a time (two accounts in total) and the annual £3,600 allowance can be split between the two types of account.
Cash Junior ISAs work like an ordinary long-term savings account, except the interest is free from personal taxes. Investment in a stocks & shares Junior ISA can be linked to a range of shares and growth is also free from personal taxes – the value of the account will vary according to the performance of the underlying investments.
Parents, grandparents and friends of the family can all contribute to Junior ISAs, provided that in total the amount paid in does not exceed £3,600 a year. Contribution limits apply to tax years (6 April to 5 April).
Junior ISA accounts are owned by the child, but managed by the parent. The child can take over responsibility of the Junior ISA at the age of 16 if they wish, but are not able to touch the money until he or she is 18. And, if the money in the Junior ISA is not needed when they reach age 18, their Junior ISA will automatically roll over into an adult ISA.
Make the most of your tax year allowance now
Remember, the tax year runs from 6 April to 5 April the following year, and if you don’t use it you’ll lose your child’s Junior ISA allowance for good. So make the most of their allowance to help plan for your child’s future.
Saving and investing in a Junior ISA for your child
We all know that the cost of living isn’t getting any cheaper – for example the average student debt is currently £24,8001 - and with tuition fees set to rise this will increase. The average deposit on a property for a first time buyer is £41,6492 and buying a typical second-hand car could cost £2,9953.
Whether you’d like to save for your child to help them with the costs of university, buy a home or car – or to travel the world, it’s hard to know what things will cost when your child reaches 18, but with inflation it’s highly likely that costs will be much greater in the future.
Saving from now until they’re 18 really could make all the difference to your child’s future. And as it’s your child’s future that we’re talking about, putting money aside now will help to provide the assistance they’ll need.
That’s what makes the Junior ISA such a good idea – it’s all about planning ahead and giving your child a helping hand as they start out on their adult life.
Junior ISA from The Children’s Mutual
We’re the only company in the UK that specialises solely in savings and investment for children. For over 130 years we have been helping families provide and save for their loved ones.
Why 1 in 4 parents chose The Children’s Mutual
Owing to our expertise, as well as being voted Moneyfacts Best Child Trust Fund Provider for four years running, more than 25% of parents in 2010 actively opening their child’s Child Trust Fund did so with us. So, put simply, your child’s account will be in experienced hands.
You can apply online for our Junior ISA in less than 10 minutes - so why not get started saving for your child’s future right here and now? To read more about our Junior ISA please download our Junior ISA Brochure below.
The risks
Our Junior ISA is linked to stocks & shares and has the potential to build up a healthy lump sum for your child at 18 – especially if regular contributions are made over as long a period as possible.
Experience shows that investment linked to shares has generally produced better returns than cash deposit accounts over longer periods, although of course we can’t guarantee that this will continue in the future.
However, as with any investment linked to shares, the value of our Junior ISA is not guaranteed, and will move up and down over time. However, to spread the risk, our Junior ISA invests in a fund that aims to match the performance of the widest range of UK company shares, rather than just a few.
Sources:
1. The National Union of Students estimates that the average student graduating and leaving university will have a debt of £24,800. This is based on a three year course including tuition fees according to National Union of Students (July 11).
2. House price index from www.nationwide.co.uk indicates that the UK average house price for First Time Buyers is £166,597 (Q3 2011).
3. www.whatcar.co.uk A typical 7-year old second hand car e.g. 2004 Vauxhall Corsa 1.0 12v Active 3dr today (October 2011) cost £2,995.