With the launch of the Junior ISA this month, parents are able to enjoy competitive rates when shopping around for the best deals on children’s savings.
Providers, some of whom have been launched specifically because of the new Junior ISA market, are vying to attract new customers with the new children’s savings scheme.
What is the Junior ISA?
The Junior ISA is much like an adult Individual Savings Account, in that it is tax-exempt savings for children that can be held in traditional savings or in a stocks and shares account.
It was announced shortly after the government controversially scrapped the Child Trust Fund from 1 January 2011. The Junior ISA bears much resemblance to the previous scheme, but does not include a government voucher to give your child’s savings a head start.
However, because of competition for the new market of parents looking to save for their children, parents who open a Junior ISA over the next few months will enjoy top rates that Child Trust Fund holders will not.
While the two schemes are similar, they are mutually exclusive, meaning that if your child was eligible for a Child Trust Fund, they are unfortunately not eligible for the competitive Junior ISA rates.
Parents opening a Junior ISA this month are going to be bombarded by the wide range of private providers. The amount of buzz surrounding the product’s November launch as well as the hundreds of investment and savings options will give parents free choice with how to invest their money.
Experts urge parents and children who are eligible for the new scheme to take advantage of this opportunity to enjoy a wide range of options with top rates. While it may be harder to find the incentive to start the account without a government contribution, the competitive deals on offer mean a ray of hope on an otherwise bleak savings landscape.
With the base interest rate being held at 0.05%, many savers have taken a beating over the economic turmoil of the past few months.
These deals mean a fighting chance to beat bad rates and build a nest egg for your child, experts say.
The advice to start tax-free saving is especially pertinent in light of the new £9,000 tuition fees, set to take affect next year.