Junior ISAs (JISAs) can be the perfect tool for nurturing financial literacy in kids. I have been teaching my 16 year old son about investing by setting him up a Junior ISA and discussing where he can put his money to get the best potential for growth. However, he is very sensible. I am not sure the same will be said of his sister who loves makeup, jewellery and horses.
Designed specifically for children under the age of 18, Junior ISAs provide a tax-efficient way to save and invest for their future. They / you can put £9,000 per tax year into them and there are cash ones as well as stocks and shares ones. The money then grows tax free.
Your child can take control of the ISA when they’re 16, but they cannot withdraw the money until they turn 18, making it a potential good place to a save for their future, but it does have limitations.
They cannot use the money to buy a car when they turn 17 as they cannot get the money out until they are 18.
They have access and control of the money at age 18 (as long as they know about it 😉), so they can go and blow it all on a holiday, a car, a party, getting drunk or worse.
Do you trust your child with this money or would it be best to save for them elsewhere?
I have many clients that have decided against Junior ISAs for their children and instead utilised other investments to save for their children’s futures, guaranteeing that they use it wisely. We have all heard of those children that go off the rails or the ones who just don’t make the best decisions.
Therefore I generally lean towards avoiding them.
I have only just set up my son with a JISA recently as he has shown his maturity and how sensible he is with money. Phew!!
Can grandparents contribute to a Junior ISA?
Yes.
Can you contribute monthly or one off amounts?
Both, they are very flexible and you can make one off payments as well as monthly ones, which you can increase, decrease, stop and restart.
How much can go into a JISA?
At the moment, £9,000 per tax year can be contributed in total.
Is there tax to pay on a JISA?
Nope. There is no income tax, capital gains tax or dividend tax.
The big question is: do you want your hard earned money being spent frivolously or do you want a say in how it is spent?
