Are Junior ISAs worth it?

If you’re looking for a long-term investment or savings account for your child, then the benefits of a Junior ISA could make it a great option. So, if you meet the criteria for wanting to look after your child’s future, then read on to find out if this investment is the right option for you.

What should I know before opening an account?

A Junior ISA – or Junior Individual Savings Account – is a long-term savings or investment account that allows parents to save or invest tax-free towards a lump sum payment that their child will receive once they reach 18 years old. This way parents can save or invest money for their child’s future without having to pay any income tax or Capital Gains tax on the returns. 

Children must be under 18 and a UK resident to open an account. The child can take control of the account when they turn 16, but can only withdraw the money once they turn 18.

To open a Junior ISA for your child you must be either the parent or legal guardian, but other relatives and friends can also contribute to the account once it has been set up. At Shepherds Friendly, this can be done through one-off top-ups or a monthly Direct Debit from just £10.

Looking for more information to get started? Check out our comprehensive guide ‘What is a Junior ISA?’.

Cash vs Stocks and Shares Junior ISAs

There are two types of accounts: cash, or stocks and shares Junior ISA.

With a cash Junior ISA, parents put money into a tax-free savings account that will earn interest. This is often seen as a lower-risk option since savings will not be subject to stock market fluctuations, however in the long-term cash has historically earned less than the typical investment account.

A stocks and shares Junior ISA, on the other hand, involves investing money across a range of different investment types such as corporate bonds or company shares. This can earn greater returns than a cash ISA, but you should remember that all investments carry a level of risk due to potential stock market fluctuations.

Each JISA has an annual allowance – find out more about how much you can save or invest with our Junior ISA allowance guide for 2023/24.

What are the benefits of a Junior ISA?

The main benefits of a Junior ISA are that they are easy to set up and manage, and they allow you to invest in your child’s future without paying any tax on the returns.

The lump sum payment from the returns that you have invested makes for an extra special birthday present when your child turns 18. The money can be used for their future ambitions, whether it’s for their university education, to help them onto the property ladder, or even to help fund their first round the world trip. 

There are also specific benefits associated with both cash and stocks and shares Junior ISAs. A cash Junior ISA is less risky and you won’t get back less than you put in, whereas a stocks and shares Junior ISA carries more risk but can produce better returns in the long-term. 

Is a Junior ISA the right option for me?

When considering if a Junior ISA is the right option for you, it is important to note that the yearly ISA allowance sets a limit to your child’s account.

The money in the account cannot be withdrawn until your child turns 18, making it unsuitable for account holders who would need to withdraw money before that date. All the money belongs to your child, granting them full control once they reach their 18th birthday. This also means that you are not able to claim the money for yourself.

Contributions from extended family and friends are possible, making a JISA a great option if you want to give other people the option to invest in your child’s future, for example as a birthday or graduation gift. 

You should also ask yourself the question if you want to save or invest money for your child. If you choose to invest in a stocks and shares Junior ISA, you are at risk of losing money due to market fluctuations.

Why open an account with us?

At Shepherds Friendly, we offer a Junior Stocks and Shares ISA that could help you to provide for your child’s future from just £10 a month.

We adopt a medium-to-low risk investment strategy, investing across stocks and shares, equities, bonds, and property. Thanks to smart investment decisions by our fund managers, our Junior Stocks and Shares ISA has been able to pay a bonus every year for the last 10 years.

Here are the key benefits to keep in mind:

• You can invest from £10 a month all the way up to the annual allowance of £9000 
• We are flexible. You can stop, start, raise and lower your premiums, and add lump sums to the investment plans too.
• We help you increase the investment potential of a Junior ISA by accepting contributions from anyone who wishes to deposit money into the account, such as grandparents or other family members.
• All funds invested belong to the child, and cannot be withdrawn until their 18th birthday.
• Your money is invested across a broad range of assets in the Multi-Asset Strategies Fund.

Find out more about our Junior ISA plan in this video:

Be sure to read through our Important Information Guides for all the key information about our Junior ISA. Remember that when you invest, your capital is at risk.