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How do I successfully secure my child’s future with a JISA?

How do I successfully secure my child’s future with a JISA?
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It’s now been a decade since Junior ISAs (JISAs) were launched, and they’ve helped many parents to save for their children’s future. However, some parents are yet to open a JISA while others are facing saving challenges. Consider these six tips to save with a JISA successfully.

1. Use a JISA for tax-efficient saving

If you generate an income above £100 a year from your savings and investments for your child outside a JISA, you’re taxed at your marginal rate. However, if you save and invest in a JISA, the gains are sheltered from tax, regardless of the income.

In addition, when your child gets access to their account at the age of 18, they can choose to transfer their Junior ISA into an Adult ISA to continue their tax-free saving journey.

2. Put in as much as you can comfortably afford

You don’t really need to put a fortune aside to be successful with a JISA! In fact, it allows you to comfortably save and invest for your child even if you’re on a tight budget. It’s always best to save as much as possible to ensure the highest possible return when your child accesses their account.

Sarah Coles, personal finance analyst at Hargreaves Lansdown (HL), highlights that the average regular HL JISA saver puts aside about £87 a month. This means a regular saver who keeps up payments of £87 a month builds up to £13,510 in ten years, with a long-term investment return of 5% a year. The amount increases to about £30,381 if you save for 18 years.

3. Invite relatives to pay into your child’s JISA

Sarah Coles explains that about a third of HL JISAs are paid into by more than one adult, especially grandparents keen to do something for their grandchildren. Naturally, monthly payments from a number of sources or bumper payments around Christmas or birthdays could significantly boost your child’s account.

4. Try to be consistent

One of the reasons some parents don’t see their child’s JISA savings and investment returns grow significantly is failing to keep up with monthly payments. Setting up a direct debit to your child’s JISA on or soon after payday can take the stress out of saving for their future.

5. Talk to your child about their JISA

Some parents worry that the hard work they put into saving for their child’s future may all be in vain. They fear that once their child turns 18, they’ll blow the bumper payout. The solution is quite simple.

Talk to your child regularly about their JISA so they have an idea of how it works. Regularly discuss options to use the money responsibly in the future. Your child will gain a sense of responsibility and ownership, meaning they’re more likely to make wise choices.

6. Choose your Junior ISA carefully

There are two types of JISA: A cash JISA and a stocks and shares JISA. As the name implies, a cash junior ISA allows you to pay in cash and not pay tax on any interest earned on your savings. With a stocks and shares ISA your cash is invested, and you will not pay tax on any capital growth or dividends received.

You can only open one Junior Cash ISA and one Junior Stocks and Shares ISA per year.

Keep in mind that a stocks and shares Junior ISA offers far more potential growth than cash, especially if you’re saving and investing for the long term. It also helps to compare top-rated Stocks and Shares ISAs for the most competitive deals.

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