Shares Junior ISA
The Shares Junior ISA is another method of saving for your children’s future. These accounts work by investing your children’s money into shares. These accounts are deemed to be more risky than putting your money in a Cash Junior ISA but the potential returns, especially over a longer period can make that a risk worth taking.
The money is locked away in the Shares Junior ISA until the child’s 18th birthday, by which point it should have grown sufficiently to pay towards a car, university or even a house deposit.
All interest earned on the money in these accounts will be paid tax free, and this will not affect your other tax rights.
Whilst the figures for how much you can top up these accounts have yet to be announced, the Child Trust Fund, the Junior ISAs predecessor, allowed you to invest as little as £10 a month, or up to £1,200 a year.
A shares Junior ISA will encounter fees for investing the money, in the same way you would pay a fund manager to look after your investments as an adult. The government only limited these fees for Stakeholder Child Trust Funds, at 1.5% (so £1.50 for each £100 in the account) but not for Shares Child Trust Funds. It’s unlikely that they will limit the fee’s for Shares Junior ISAs, but the final plans have yet to be announced.
The biggest advantage of the shares Junior ISA is that history shows that money invested in the stock market tends to pay more than money invested in a savings account over a longer period.
To open an account for your child you need to be a UK resident eligible to pay tax.