Saving for Children Children’s Savings Plans Explained

Opening a child’s savings plan early is a great way to make a difference in your little one’s future.

If you’re unsure of the best way for you and your family to start saving or investing for your children, we outline the different options you have to help you get started.  

Here are some of the benefits of a Shepherds Friendly Junior ISA: 

• You can save from £10 a month all the way up to the annual allowance of £9,000.  
• Our plan is flexible. You can stop, start, raise and lower your premiums, and add lump sums to the savings plans too. 
• We help you increase the savings 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• All funds invested belong to the child and cannot be withdrawn until their 18th birthday. 

What savings plan is best?

Saving for your child is a great way to help prepare them for whatever their future may bring. However, it’s important that you’re aware of the different types of child savings plans so you can decide what’s right for you. 

Junior ISA

When it comes to a savings plan for your child, a Junior ISA is a great option as it allows you to create savings for your child from what you can afford.

Once your child turns 18 you’re able to give them all the money they’ve saved, at once, and it’s tax-free. They can then decide how to use these savings and how to put them towards their future, whether that be their education, a car, or even a house. Or they have the option to reinvest the money into an adults ISA, for example our Stocks and Shares ISA.

Junior Stocks and Shares ISAs also have more potential for growth, in comparison to Junior cash ISAs and children’s savings accounts. At Shepherds Friendly you can open a plan from just £10 a month and add to your child’s savings with regular monthly payments or contribute via lump sums. 

Find out more about our Junior ISA in this video:

Child’s Trust Fund (CTF)

A Child Trust Fund is a tax-free savings account introduced by the government designed to save or invest over the long term. However, they are no longer available for children in the United Kingdom, as they were replaced by the Junior ISA. If you do have a CTF, then you are able to transfer it to a CTF with another provider, or to a Junior ISA. If you’re having trouble finding a CTF you took out in the past, contact HM Revenue and Customs (HMRC) and they will be able to locate your account and provider. 

Junior SIPP

A Junior SIPP (Self-Invested Personal Pension) is similar to a regular SIPP, however, the key difference is the account and any investment decisions are managed by the parent/guardian until the child turns 18. 

Opening a child savings account 

When you start saving for your child from a young age, it can help give them a head start in life. Nobody knows what the future will bring, and every parent wants their child to grow up prepared for the future. 

A Shepherds Friendly Junior ISA can be set up by a parent or guardian from just £10 a month and includes a premium guarantee, which means you’re guaranteed to receive at least what you invested, plus any bonuses if you leave the plan invested until their 18th birthday. 

By saving for your little one while they’re young they’ll learn to understand the value of money, by depositing any spare birthday or Christmas money in their Junior ISA and teaching them that this money will grow for their future. 

Junior investment plans

A Junior ISA is available to any child who lives in the UK and who does not already have a Child Trust Fund in their name. It’s a flexible and tax-efficient savings plan invested in our With-Profits Fund that aims to pay a quarterly bonus every three months, the value of which will depend on the fund’s performance. 

Who can open a savings plan for children? 

A Shepherds Friendly Junior ISA can only be opened by: 

• A parent 
• A legal guardian 

Once an account has been opened, relatives and friends can also contribute to it. To add money to the account there are a couple of different methods, one is setting up a monthly direct debit that can start from £10 a month and the second method is making one-off payments.

Another benefit is the child can take control of the account when they turn 16 but can only withdraw the money once they turn 18. For more information read our helpful guide, what is a Junior ISA?

Understanding the allowances and taxes with saving plans for children

With child savings plans like a Junior ISA there is an allowance you can invest before you begin to get taxed. The current Junior ISA annual allowance is £9,000. This amount is reviewed and set by the government each year and could potentially change in the future. 

If you have multiple child savings plans then you’re able to spread the allowance over these accounts. For example, you can save £5,000 in a Junior Stocks and Shares ISA and £4,000 in a Junior Cash ISA without being taxed. For more information read our guide on What is the Junior ISA Allowance? 

Opening a child’s savings plan with Shepherds Friendly 

Shepherds Friendly’s Junior ISA can be opened from just £10 a month and is invested in our With-Profits Fund, which is a medium to low-risk fund that invests primarily in stocks and shares, with the aim of producing greater growth over the long-term than would be achievable in a cash-based account.  

Once we have paid a bonus into your child’s plan we will never take it away, and the value of the plan will not fluctuate daily in line with stock market performance. The bonus paid quarterly will reflect the performance of the fund over that period. 

Please remember, when you take out an investment product, your capital is at risk and you may get back less than you have put in.  

The value of the JISA depends on the future performance of the investments held in the fund and the bonuses we distribute from any profits arising from these investments. 

The money invested into a Junior ISA cannot be withdrawn early; it can only be withdrawn by the child when they reach the age of 18 years old. We will calculate the value of your investments in the With-Profits Fund if you transfer your plan elsewhere or when the plan reaches maturity. We do this to ensure you receive your fair share. If you have been invested through periods of poor investment performance, you may get back less than the current value of your plan. This is known as a Market Value Reduction (MVR). 

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.