Saving Cash for Your Child is a Waste

Saving cash on behalf of your offspring as tantamount to throwing money away; instead, invest small amounts regularly in a top-rated equity fund to build wealth by the time they come of age

Kara Gammell 12 November, 2015 | 10:55AM

It’s been four years since the launch of Junior ISAs (JISAs), the tax-efficient plan to help parents and guardians build up a long-term savings pot for their children. Savers can put up to £4,080 annually in a Junior ISA and invest in any combination of equity funds, bond funds and cash, but these accounts have failed to meet their full potential thanks to low interest rates.

Cash a Terrible Way to Save

“Cash JISAs are a simply terrible place to park wealth for the long term as the real value of the capital will be eroded over time by the corrosive impact of inflation, which is the silent assassin of wealth,” says Jason Hollands, managing director at Tinley BestInvest.

What’s more, interest rates on these cash accounts are continuing to fall. Furness Building Society, for instance, once offered a best buy rate of 3.05%. This has been cut repeatedly over the last couple of years and the rate now stands at 2.10%, while Halifax dropped the rate on its Junior Cash ISA (linked to an adult ISA) from 6% to 4%. Skipton Buidling Society, which also once offered a competitive rate of 3.02%, chopped its rate to 2.65%, sending it falling off the best-buy tables.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BNY Mellon Real Return A GBP Inc109.05 GBP0.21
Fidelity Index Emerging Markets P Acc134.69 GBP1.26
Invesco Global Tgtd Rets UK Acc56.85 GBP-0.28
Scottish Mortgage Ord530.62 GBP-1.46
SLI Global Absolute Ret Strat Ret Acc74.72 GBP0.28
Vanguard FTSE Dev Wld ex UK Eq Idx Acc322.69 GBP-0.41

About Author

Kara Gammell

Kara Gammell  is a freelance journalist and author, specialising in personal finance and consumer issues, writing for Morningstar.co.uk

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites