When you become a parent, one thing that becomes immediately apparent is your desire to provide for your new child. That desire to provide, however, extends far beyond the short term immediate needs of your newborn baby. You quickly find yourself looking towards setting them up with some financial stability later in life. And that’s where a Junior ISA might come in! If you’ve ever thought to yourself “should I get a junior ISA for my child?” then this post might be for you!
Why You Should Get a Junior ISA For Your Child as Soon as Possible
I opened a junior ISA for our daughter Isabelle less than a week after she had been born. Why did I do it so soon? Well to put it simply, I just wanted to be able to put our daughter in a position where she had a good amount of money when she was older. And the sooner I started, the sooner that money could grow.
In essence, long term investments are fairly simple. The longer you are able to leave the money to grow, the more it is likely to actually grow.
If you have a ten year old and open a junior ISA, then that money can be legally withdrawn by the child on their 18th birthday – giving it 8 years of total growth. Open an ISA when they are born, however, and you’re looking at 18 years of growth. Thus you will hopefully be setting them up with more money for their future.
Do I have to have a lot of money to open a Junior ISA for my child?
One reason a lot of people may avoid even opening a savings account for their child in the first place is the simple fact that they don’t have much money themselves. And it’s a fair point. But you don’t need a lot to open account. Often accounts can have a minimum deposit of something like £1 and you are not tied in to a minimum monthly amount that you have to pay in. Basically, you can simply put away money as and when you can, and allow it to grow.
If you are struggling to put food on the table or are financially unstable yourself, then remember this one thing about Junior ISAs:
YOU WILL NOT BE ABLE TO GET THE MONEY BACK YOURSELF
The difference between setting up a Junior ISA for your child and something like a regular saving account is who owns the money. Everything you put in a Junior ISA is going to be owned by your child. You cannot get it back unless your child is terminally ill or dies. So that money will legally be theirs to manage at 16, and legally theirs to withdraw at 18. Whether they are drug addicts or law abiding citizens. It is their money.
After you’ve decided whether this is something that you are happy with, then the next thing you have to ask yourself is whether to open a stocks and shares ISA or a Cash ISA for your child.
Stocks and shares ISA Vs Cash ISA
One of the things you’ll have to decide when looking into ISA accounts is whether to go with a stocks and shares ISA or a cash ISA.
What’s the difference between a stocks and shares ISA and a cash ISA? Well one is guaranteed – at least usually. A cash ISA will provide you with a certain percentage of growth – 3.5% if you’re super lucky – and that’s the max you will get. You won’t ever lose money on your savings, but you also won’t gain more than the quoted amount either.
Meanwhile, a stocks and shares ISA carries more risk. There’s a chance you may put £1000 in and in a few years time it’ll be worth £900 instead. That’s highly unlikely, but it is a possibility. There’s also a possibility that it’ll be worth far more.
Stocks and shares ISAs are generally something you would want to consider for long term investments, as generally they gain more in the long run. And that’s exactly what a junior ISA is going to be.
How to Select the Best Junior ISA for you
These days it’s incredibly hard to pick almost anything. From our internet to our utility bills, there’s a seemingly endless list of options out there. And the same can be said for ISAs. My advice is fairly simple. Think about what you want from your ISA – whether you want stability or an element of risk for higher growth. And then find someone else who has already done all the research for you. Simple find a good solid list of the top Junior Children’s ISAs and try to work out which one best suits your needs!
If you’re interested to know, we opened our Junior ISA via Quidco – which I highly recommend you do yourself – so that we could gain cashback upon opening the account. You could easily earn up to £160 cashback that you could either keep for yourself, or invest further into their newly opened ISA account.
