Our little man is a little over 9 weeks old now but before he was even born I was of the view that I wanted him to know the value of money, so much so that I have recently opened a Junior ISA for him as well as a savings account.
Why have I opened a Junior ISA when he is so young?
When I was growing up I never appreciated money and what had to be done to earn it.
I was given pretty much everything that I asked for, whether that was technology, I always had the latest games console, which is considered retro now, or even a pony, which came with it all of the other associated costs such as stable costs, the kit (yes I wore jodhpurs) and vets bills.
Money was never discussed so I had no idea that my mum didn’t bring home a great wage at the end of the month and was probably naive to the fact that for me to have what I wanted she might have had to go without.
As far as I can remember personal finance and financial education was never taught in school so my only experience of the difference between those that have and those that have not was occasionally staying with my aunt and her then-husband where they lived in a nice area in a nice house and he drove a nice car, but even as early as then.
I probably was of the view that this was because he worked for himself in an office, but there was no connection between this for me and that of the fact that different jobs paid more than others. I thought that it was given that if you worked in an office and worked for yourself then that is what you would get regardless.
So what is a Junior ISA?
Not unlike an ISA (Individual Savings Account) that you or I might open, it is essentially a way for you to save a certain amount of money in each tax-free for your child.
With a Junior ISA, your child is unable to access their money until they are 18, though will be able to manage the ISA when they reach 16.
Questions to ask before you open a Junior ISA
The most obvious question I guess would be, is a Junior ISA right for my child.
A Junior ISA doesn’t necessarily pay as much as a Junior Savings Account, but this shouldn’t be your only consideration.
I opened both as a way to ensure that at least when he is 18, no matter what he does with the money in the savings account there will be something for him for later on.
You should also consider how you want to manage the account, whether it allows transfers and whether you want to open a cash ISA or stocks and shares ISA (remember this is riskier and what you put in isn’t necessarily what you are going to get out.
What are the alternatives?
An ISA isn’t the only option available to you if you want to invest in your child’s future, this is also other ways to save money too:
- Savings account
- Taking out a pension
- Investing in stocks and shares
Who can open a Junior ISA?
To open a Junior ISA the child must be under 18 and live in the UK.
It can be opened by the child’s parent or legal guardian.
Unfortunately at the time of writing, grandparents aren’t allowed to open a Junior ISA but are able to contribute to it.
Managing a Junior ISA
Depending on the provider of the ISA there are a number of ways that you are able to manage it.
I opened our little man’s ISA with ns&i as this could be managed online and had a rate of 3.25% AER variable, though some can only be managed by phone in branch or by post which didn’t suit our circumstances.
How much can I save into a Junior ISA
The amount that you are able to put into the ISA will change in the tax year and as of writing the most that you can put into a Junior ISA in 2019/2020 is £4,368.
Who provides Junior ISAs?
Depending on whether you are opting for a cash ISA or stocks and shares ISA you can generally open one at a bank, building society or at a stockbroker.
Who provides the best ISA rates?
If you don’t fancy doing your own homework you can use a junior ISA best buy table.
Remember I’m no financial expert so this post does not constitute financial advice and what might be right for our circumstances might not be right for yours, so if you’re unsure it might be worth talking to the experts.
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