How to save money for your child and the best Junior ISA to pick

Junior ISAs are a popular way for parents to save for their kids (Picture: Getty Images)

Around one million Junior Isas are paid into each year, making them a popular way for parents to save for their child’s future.

A Junior Isa is a tax-free savings account aimed at children under the age of 18. Parents or children can save up to £9,000 a year into an account, and the child is able to withdraw the money from the age of 18.

A Junior Isa is a great way to save for your child, but be aware that no bank or savings provider is offering an interest rate that matches inflation.

The top interest rate available on a cash Junior Isa is 2.35%, offered by Coventry Building Society, while inflation is currently at 5.5% and expected to rise again over the coming months.

This means that the money you save is losing value in real terms: £100 saved today, for example, would only be worth the equivalent of £74 in ten years’ time on an annual difference of 3% between inflation and interest rates.

So if you want your child’s savings to potentially beat inflation over the long term, then a stocks and shares Junior Isa is worth considering.

Remember that investing comes with an element of risk. There is no guarantee your investments will perform well and during times of stock market turbulence your money is likely to go down.

As Junior ISAs are generally long-term it might be worth considering a stock and shares ISA (Picture: Getty Images)

But over the long term, the money should rise again as confidence in the stock market returns. Over the past ten years, the average stocks and shares Isa has returned 9.6% a year, while the average cash Isa has returned around 1%, according to the investment firm Moneyfarm.

‘Cash Junior Isas are frankly pointless other than as an option for teenagers who might shortly need to access their pot and therefore want to remove the short-term risk of a sudden loss of value,’ says Myron Jobson, a personal finance analyst at investment platform interactive investor.

‘Most Junior Isas are going to be inherently very long term, because they cannot be accessed until the child is 18, and there is ample time for short-term bumps in stock markets to be ironed out.’

You don’t need large sums of money to start investing. Some providers allow you to invest from as little as £10 a month, or to pay in small sums on an ad hoc basis.

The biggest Junior Isa investment providers include Hargreaves Lansdown, AJ Bell, Fidelity, Vanguard and interactive investor, while newer digital rivals include Nutmeg and Wealthify.

You will pay fees to hold an investment Isa and you want these to be as low as possible — ideally well below 1% a year — so it is worth comparing different providers.

When it comes to investment choices, it can seem overwhelming as there are thousands of investments to choose from. But providers offer ready-made funds offering a mix of investments, or you could invest in a cheap global tracker fund that replicates stock markets across the world.

Examples include Vanguard’s FTSE Global All Cap fund, HSBC’s FTSE All World fund or Fidelity’s Index World fund. AJ Bell says Vanguard’s LifeStrategy 100% Equity Fund is the most popular fund picked by parents on its platform.

This fund invests solely in company shares, meaning it is a higher-risk option that is most suited to long-term investing where there are no plans to withdraw the money for at least five years.

Emma-Lou Montgomery, an associate director at Fidelity, adds that the Rathbone Global Opportunities fund could be another investment option, while those looking to take advantage of recent developments in the tech industry could consider Baillie Gifford’s American fund.

‘When you’re choosing what to invest in for your child, you can be bold. With up to 18 years before they can access the money, there’s plenty of time for the investments to grow,’ she says.

Saving for your little one’s future might not take priority at the moment amid rising living costs.

But even small contributions can add up to a significant sum over the long term as they will benefit from compound interest — which is when you effectively earn interest on top of interest.

The money could provide them with a financial boost to help see them through university, purchase a car or get on the housing ladder. As long as they don’t spend it all at once!

Junior ISAs at a glance

  • Only a parent can open a Junior ISA for an under-16, or a child aged 16 and 17 can open their own
  • Once the account is open, any family member or friend can contribute
  • The child can take control of the account from age 16 — deciding where the money should be saved or invested
  • Once they reach 18, they can withdraw the money. If they want to continue saving, the Junior ISA converts to an adult ISA
  • There are cash and investment Junior ISA options. You can either pick one, or pay into one of each
  • Any returns made through the account are free of income tax and capital gains tax
  • The maximum that can be paid into Junior ISAs is £9,000 a year per child

‘Savings for Arthur’s future will be more useful than plastic toys’

The Sumners contribute to a Junior Isa for baby Arthur

Tom Sumner, 31, has an investment Junior Isa for his six-month old son, Arthur, which his wider family also pays into.

Tom, who lives in north London and works in private equity, currently pays £200 a month into Arthur’s account although he may increase this in future. He asks grandparents and other family members to contribute to the account on Christmas and birthdays, instead of buying Arthur presents.

‘I don’t like the thought of Arthur receiving plastic toys that he may grow out of quickly. Setting aside savings for Arthur’s future will be much more helpful to him in the long term. The fact it’s locked away in a Junior Isa that he can’t touch until he’s 18 means there is no temptation to spend the money before then,’ Tom says.

Arthur’s Junior Isa is with Nosso, a family-focused investment provider founded in 2020.

It offers a handful of funds that invest in up to 2,500 companies for an annual fee of 0.3% plus platform charge of 0.5%.

Apps to help your child learn how money works


Helps kids manage their pocket money

RoosterMoney helps children manage their pocket money and set savings goals with the help of visual charts to monitor progress.

The app is free or £14.99 a year for additional features such as a parent-paid interest rate to incentive saving.

There is the option to add a pre-paid Visa debit card for £24.99 a year. Multiple children can be added to the app, and there is a separate parent log-in so parents can monitor and control the account.

Download on Android.

Download on iOS.


Kids learn to budget and save with their own debit card

GoHenry, which costs £2.99 a month, is another popular financial education app that comes with a debit card to give children a bit of independence and control over how they spend their pocket money.

Children learn how to budget, earn money through chores, set savings goals and donate to charity.

Parents have control of the app and can set limits on the amount spent each week, where money is spent and how much can be withdrawn from an ATM.

Download on Android.

Download on iOS.

Maths Champions

Get a head start on maths

If you want to give your child a helping hand with maths, then Maths Champions could be worth downloading.

The app teaches children aged seven-plus about adding, subtracting, multiplications and divisions through a series of games that help test their memory and logic.

The free version includes two games, or you can pay £1.79 to have access to 11 games. For younger children, there is another app from the same developer called AB Maths.

Download for iOS.

Revolut Junior

Free for one child with an adult account

Revolut, a digital bank, offers a children’s account called Revolut Junior. The account comes with a prepaid debit card and an app to help children learn about managing their money.

Parents pay money into the account and can set controls on how the debit card is used.

To sign up to Revolut Junior, you must already hold a Revolut adult account. Revolut Junior is free for one child, and costs from £2.99 a month for two or more children.

Download on Android.

Download on iOS.

Idle Coffee Corp

Create a mini business empire

This is a fun way to introduce your child to running a business as they learn how to create and manage their own empire. Players start with one shop, serving one type of coffee.

As they accumulate takings, they can expand their range and hire staff. The app is free but offers purchases to customise the business.

Download on Android.

Download on iOS.

If you want more tips and tricks on saving money, as well as chat about cash and alerts on deals and discounts, join our Facebook Group, Money Pot.

MORE : How to pick the right ISA for you, without stress and confusion

MORE : Why it might be time to ditch cash ISAs

MORE : What are ISAs and how do you choose the best one for you?

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