Junior Isas Explained

Parents can put up to £9,000 in a Jisa, but don't forget it's their money

James Gard 25 August, 2021 | 9:18AM
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Girl with piggybank

Junior Isas were launched nearly 10 years ago in November 2011 to replace Child Trust Funds. These accounts are an increasingly popular way for parents (and grandparents) to build up a nest egg for young people, who are faced with high housing and education costs at the outset of adulthood.

Things to Remember:

  • The annual allowance is £9,000 for each child, who must be under 18 and living in the UK.
  • It can be only be opened by the child’s parent or legal guardian, but can be paid into by grandparents, friends and other family members.
  • Like adult Isas, the Junior Isa can be invested in either stocks or cash and you can have two providers in the tax year, but not two of the same type
  • The savings rates on Junior Isas are often higher than for adult Isas
  • A parent or child can't dip into the Jisa
  • If you have a Child Trust Fund open for your child, you can transfer this to a Jisa

With a potential 18 year investment horizon for a Junior Isa (if you start the year the child is born), the numbers can start to look seriously impressive.  A parent of a child born today, putting in the full amount of £9,000 in cash, would save a staggering £162,000 over 18 years – that’s without any interest. If you invested the money and it grew at 6% a year, the child would have almost £300,000 by their 18th birthday. Even accounting for inflation, that's a serious amount of money that could go towards a first property, university fees, or first car.

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James Gard  is content editor for Morningstar.co.uk


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