Junior Individual Savings Accounts (also known as Junior ISAs or a JISA) are long-term, tax-free savings and investment accounts for children.
They were introduced in 2011, effectively replacing a similar product known as the Child Trust Fund.
Junior ISAs work in a similar way to ISAs for adults. For example, there is a maximum amount of money that you can put into a Junior ISA each year.
You can put money into a savings account or into stocks and shares. If you want, your child can have one cash JISA and another JISA for stocks & shares.
Any income received or profits that are made within their Junior ISA are free from both income tax and capital gains tax.
A key thing to be aware of is that your child can control what happens within the Junior ISA once they become 16. And it’s legally their money, so they can access it once they become 18.
No money can be withdrawn from a JISA before your child turns 18 unless they are exceptional circumstances (such as the child dying or becoming terminally ill).
Who can get a Junior ISA?
Your child must be less than 18 years of age and living in the UK to get a JISA.
However, if your child lives overseas because you have to live there to work for the UK government or armed forces, then they can also have a Junior ISA.
Only a child’s parent or their legal guardian can open a Junior ISA on their behalf.
How much can you put into a JISA each year?
The annual subscription limit for Junior ISAs is currently £9,000.
Note that this is a combined limit, so if your child has a Junior Cash ISA and a Junior Stocks and Shares ISA, the £9,000 maximum covers both accounts (so you could put £4,000 in one and £5,000 on the other).
Anyone can put money into a Junior ISA, so it can be funded by grandparents and other family members in addition to a child’s parents.
Should you get a cash JISA or a stocks and shares JISA?
This a personal choice however, generally speaking, you would expect the long-term returns from a cash JISA to be lower but less volatile.
Should you get your child involved?
Again this is a personal choice but many people like to use Junior ISAs to help teach their children about money and the long-term benefits of investing in shares.
Can you change JISA providers?
Yes, just like with an adult ISA, you can switch Junior ISA providers if you think you can get a better deal.
As always, check the small print (or ask directly) to see if moving would incur any extra charges (such as the loss of some interest on a fixed-term savings product).
What happens when your child turns 16?
When your child turns 16 they can become the registered contact for their Junior ISA and decide what happens within the account. They can’t yet access the money though.
However, at age 16 they can also open an adult cash ISA. So, for a few years, your child effectively has a £9,000 JISA allowance plus a £20,000 adult cash ISA allowance.
What happens when your child turns 18?
On their 18th birthday, the JISA automatically converts into an adult ISA (either a cash ISA or a stocks and shares ISA). So whatever has been built up so far can continue to be protected from tax for as long as it remains within the ISA. That can be very valuable.
However, your child is also able to access the money to do with as they wish. So you need to be happy with this fact if you are putting any money into a Junior ISA as even small amounts could grow into a substantial sum over the course of 18 years.