Setting up a Junior ISA can build a money pot to help your children meet the costs of adult life. With costs such as university, cars and first homes coming into play, it never hurts to start saving early.
Once your child reaches the age of 18, they can transfer their money to a fully-fledged adult ISA, retaining all of its tax advantages.
The Junior ISA (also known as a JISA) supersedes the child trust fund, or CTF. The CTF is another method of tax-free savings for those born between 1 September 2002 and 2 January 2011. New rules will allow those with a CTF to transfer to a Junior ISA at the start of the next tax year (6 April).
Almost six out of 10 parents of children with CTF are reportedly unaware of the new rules and of the benefits of a Junior ISA. Calum Bennie, a savings expert at the mutual says switching to a JISA is voluntary, but it is well worth the effort:
“Junior ISAS give parents the opportunity to seek out accounts with higher interest rates or better growth potential, and they are also a more flexible way of building a savings pot for your children.”
Sylvia Waycot, editor at MoneyFacts points out that children could earn as little as 1.10% from a Nationwide CTF, but their sibling could get 3.25% with a JISA from the same bank.
An alternative saving route is to invest in stocks and shares on behalf of your children. Many parents are reluctant to do this as they deem it risky, but as they are investing for periods of up to 18 years, in the longer run shares tend to outperform cash.