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All About Junior ISAs

If you're interested in helping your child become financially independent, give them a head start with a Junior ISA

Holly Cook 11 March, 2013 | 7:30AM

This article is part of the special series, Investing with ISAs.

Junior ISAs (also known as JISAs) offer parents and family members a tax-free way to save for their young children who do not have a Child Trust Fund (CTF). JISAs are just like ISAs, but as the name would imply, JISAs are for people under 18. These junior accounts were launched in 2011. You can get a Junior ISA from a range of banks, building societies, credit unions, friendly societies and stock brokers.

A child's parents, family and friends can contribute up to a total of £3,600 into a Junior ISA for the 2012-2013 tax year. For the 2013-2014 tax year, the limit is £3,720. (The maximum investment amount can change each year based on the consumer price index.)

Each child can have one cash and one stocks and shares Junior ISA at any one time. All interest or income generated within a JISA is automatically reinvested. Once the child reaches 18, the plan can be cashed in or transferred to an adult ISA, but the plan cannot be accessed or cashed in before this time.

Key JISA Characteristics

Below are some of the key characteristics of JISAs that you should be aware of before venturing into these saving products:

Annual JISA Limits
The maximum amount that can be put into a JISA for the 2012-2013 tax year is £3,600. For the 2013-2014 tax year, the limit is £3,720. This annual allowance is expected to rise each year, in line with inflation.

A Replacement to the CTF
Any child born before September 2002 who does not yet have a Child Trust Fund scheme in their name is eligible for a JISA, as are all children born on or after January 3, 2011. For family members who already invest in a CTF for their chosen child, the annual investment limit is now raised to match that of JISAs--£3,600 rather than the previous £1,200 limit. The key change between JISAs and the former CTF scheme is that the government does not contribute to the former.

Stocks as Well as Cash
The fact that children and their parents can not only save cash but also invest in shares and funds is welcome news. Young people are best placed to take advantage of the long-term performance of stock markets, while cash is currently offering little (nay, negative) returns given that inflation is outpacing interest rates.

Starting 'Em Young
One of the key benefits of JISAs, alongside the obvious eventual improvement to the young adult's finances, is the potential for getting your chosen child involved in saving and investing from a young age, thus hopefully leading them to become a financially-aware and financially-independent individual.

Handing Over the Reins
The recipient of a JISA can start to manage his or her investment at age 16 and at age 18 the JISA will roll into an adult ISA under the recipient's control. Between 16 and 18, the JISA holder is also eligible to save or invest in an adult ISA.

Click here for further information about JISAs.

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About Author Holly Cook

Holly Cook  is Managing Editor of Morningstar.co.uk