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Get your free guide to Junior ISAs

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What is a Junior ISA and how does it work?

A Junior ISA (JISA) is a tax-free savings account specifically for children under 18. 

The account must be opened by a parent or legal guardian, but then anyone can contribute to the account, up to a maximum combined total of £9,000 per tax year.

Until the child is 16, their parent or guardian will manage the account, although they won’t be able to withdraw any money from it.

The child can take control of the money when they turn 16, but they will not be able to access the money until their 18th birthday, at which point the account converts into a regular adult ISA and they will be free to withdraw from it.

There are two types of JISAs:

  • A cash JISA, where you save cash and it earns interest
  • A stocks and shares JISA, where the money is invested

When the child turns 18, the account will become either a regular cash ISA or a regular stocks and shares ISA.

You can read our full guide to Junior ISAs here, and view our top picks for JISA providers here.

What are the benefits of a JISA?

The tax benefits of a JISA are broadly the same as with a regular ISA, in that any interest on the cash held in the account, or any returns on the investments, are tax-free.

Another unique perk of JISAs is that anyone can pay into the account quite easily. That means friends and relatives can all contribute to the child’s future.

A JISA could also be a way of leaving money to your kids that will be free of inheritance tax. 

If you’re planning to leave money for a child for when you’re no longer around, such as if you are leaving money for grandkids, any money in a JISA will be free of inheritance tax, meaning they will keep every penny.

What should I consider before opening a JISA?

One of the main things to remember about a JISA is that the money is locked away until the child turns 18. That means no one can withdraw it. 

So, you need to be sure you want to put the money in there and won’t need it for anything else. Your child should also know they won’t be able to use it for anything before they turn 18.

Another thing worth noting is that the interest rates on JISAs are relatively low compared to adult savings accounts. 

Inflation can fluctuate, and if inflation is higher than the interest rate on your savings account, you are effectively losing money as the buying power of your money reduces.

How to beat inflation in a JISA

Make sure you compare rates before putting money into a cash JISA. Aim for an interest rate that is above the current rate of inflation.

If you are opening a JISA for a young child and it will have a long time to grow, it may be worth considering opening a stocks and shares JISA. Investments have historically outperformed cash savings over the longer term.

Of course, remember that money invested in the stock market can fall, so you could end up with less than you invested.

How to open a JISA

To open a Junior ISA, you need to choose a JISA provider and decide whether to open a cash or stocks and shares account.

The parent or guardian of the child that will be named on the account then needs to complete the application process. You will need basic information like the child’s name and date of birth.

Bear in mind that the child must be under 16 and a UK resident at the time you apply for the account.

Once the account is approved, you can make a one-off deposit or set up a regular contribution.

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