Are you a parent thinking of putting something away for a child? Here are 5 ways you could make the most out of Junior ISAs.
A Junior ISA is a tax-efficient investment, using your child’s Junior ISA allowance and the long-term growth potential of the stock market. Whether it’s to help pay for their university fees, a deposit on their first home or first ever car, investing in a Junior ISA could help them make it happen.
If you decide that investing in a Junior ISA is right for your child, we’ve put together five handy tips to help you make the most of your investment.
1. Start sooner rather than later
It’s an old adage and one that can definitely be applied to putting money away for your child’s future. Simply put, the sooner you get started, the more time you’ll have for your investment to grow.
If you’re putting money aside for a new-born or young child, you could benefit from up to 18 years of your money being invested in the stock market. And with some Junior ISAs allowing you to invest from only £10 a month, they’re an accessible way for most parents to get started. Just remember that, as with all stock market investments, the value of a Junior ISA can fall as well as rise depending on the performance of the investments held within it. Tax treatment also depends on individual circumstances, which may change in the future.
2. Let your friends and family know that they can contribute too
They say that it takes a village to raise a child and you could use the same adage to describe investing for one. A useful feature of Junior ISAs is that anyone can contribute to the child’s fund (once it’s been opened by the child’s parent or guardian) as long as the total they put in remains within the child’s £4,368 Junior ISA allowance. So grandparents, aunties and uncles and family friends can all contribute if they wish.
Some Junior ISA providers also allow payees to name their additional policy or ‘pot’ of money – for example – ‘Granny Jones’ Birthday Pot’ or ‘Uncle Joe’s Uni Fund’. As a parent, you could even add a pot for specific milestones such as ‘Johnny’s First Car Fund’.
3. Think long term
With some investments, it’s all about the long term, and as mentioned above, with a young child you have time on your side. Unlike cash savings, a Junior Investment ISA could allow you to harness the long term growth potential of the stock market. But any Investment ISA should be considered as a long-term investment, to be held for a minimum of five, but preferably ten year term. Please remember though, that unlike cash savings, the value of any Junior Investment ISA can fall as well as rise depending on the performance of the investments held within it.
4. Keep track of your investment
As with any investment, you’ll probably want to track the performance of any Junior ISA you choose for your child over the years. Gone are the days when the only way to do so would be to visit a local branch, deal with it over the telephone or get updates by post. These days, many providers let you manage your Junior ISA online or via Apple or Android apps on your phone. You may want to look for one that provides these if you’re used to managing your money on the move.
5. Choose a reputable provider
Choosing a reputable provider, with a strong heritage and an award-winning product could give you additional peace of mind. In that case you might want to take a look at the Junior ISA offered by Scottish Friendly, voted ‘Best Junior ISA Provider’ at last Friday’s 2019-20 Moneyfacts Investment, Life and Pensions Awards in London. Right now, if you open a Scottish Friendly Junior ISA for just £10 a month, not only will you bag an award winning product, you’ll also benefit from £60 exclusive cashback (to qualify for cashback you must make payments into the policy at least equal to the value of the cashback).
