Our Junior ISA tips for International Children's Day
11 July, 2017
Today is International Children’s Day. This may come as some surprise to those hard-pressed parents who feel like every day is children’s day, but it is a handy moment to review how you’re saving for your little dears.
Junior ISAs are most people’s savings vehicle of choice for their children. This makes sense. You can put in £4,260 per year, more than enough to keep them in squishies and slime for as long as they need it. Note, they only have access to the funds when they hit 16 so hopefully the slime and squishies phase will be over (though they may have worse habits by then). Any savings collected in a Junior ISA are free from income tax and capital gains tax and it is a useful way to build a tidy pot over the long-term.
Interest rates on cash Junior ISAs are generous. We would highlight these three as having consistently good rates:
The Coventry (https://www.coventrybuildingsociety.co.uk/consumer/savings-accounts/cash-isa.html)
The rates do change, however, so it is worth checking them every now and then on Savings Champion (https://savingschampion.co.uk/best-buys/personal/junior-isa/).
One thing to bear in mind when investing for children is that your time frame is usually long – 10-15 years. This means that you can afford to take a little risk because you have plenty of time to ride out any volatility associated with the stock market. As such, it may be worth considering a Stocks and Shares Junior ISA. These are the ones we like (https://www.boringmoney.co.uk/best-buys/all-providers/) (just check the Junior ISA box on the left hand side menu).
Some of you may still have a Child Trust Fund (CTF). After some argy-bargy, you can now transfer a CTF into a Junior ISA. This needs to be done through a specific transfer, and in practice many Junior ISA providers now accept transfers. For those of you with a technical mindset, the rules are here (https://www.gov.uk/government/publications/isa-manager-bulletin-65/guidance-transfer-of-a-child-trust-fund-to-a-junior-isa).
We believe it is often worth doing. CTFs had a price cap, but it meant that investors generally weren’t getting very much for their money. Junior ISAs give you more investment choice and are generally better value; also anyone can contribute to them. You can’t hold both, so you have to commit to one or the other.
Our full guide is here (https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.boringmoney.co.uk%2Flearn%2Fjunior-isas%2F&data=02%7C01%7C%7Cfefeb08812ba416c9da108d5c60ee2a4%7C84df9e7fe9f640afb435aaaaaaaaaaaa%7C1%7C0%7C636632689586841537&sdata=DUo4Atws0H0iFkYd3aCSTP8h4YWDIFICNfnv8Y5qous%3D&reserved=0) and – we believe – worth a read. This is a long-term savings plan and worth getting right.
Read next: Junior ISAs: some key facts and tips (https://www.boringmoney.co.uk/quick-reads/junior-isas-some-key-facts-and-tips/)