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Investing in your children’s future can be a great way to ensure they have a solid foundation for their finances, so they can achieve their goals when the time comes.
But what’s the best way to do this?
Read on, where we’ll explain how junior investing can help you build your children’s wealth effectively.
What is junior investing?
Junior investing is for when you want to grow your children’s savings in specific accounts designed for their personal finances.
There are two main types of junior investment accounts which you can open with a modern wealth management service – a Junior Individual Savings Account (JISA) and a Junior General Investment Account (Junior GIA).
There are a few differences between how a JISA account and Junior GIAs work:
JISA
JISAs allow you to grow your children’s savings each year and shelter this money from tax. You can only contribute a certain amount each tax year, but this money can be invested and withdrawn tax-free.
The amount you can save each year is based on the annual JISA allowance – currently £9,000 for the tax year 2023/2024.
The money in this account cannot be withdrawn until your child turns 18, at which point the account becomes a standard ISA. However, anyone can contribute up to the allowance each year.
Junior GIA
Junior GIAs work in a similar way to standard GIAs, and allow you to grow your child’s savings with a variety of investments.
Unlike JISAs, there’s no limit on the amount you can invest in these accounts each tax year. However, the returns on these accounts are taxable, so it’s important to make the most of your child’s income and Capital Gains Tax (CGT) allowances.
Also, the money in this account can be accessed at any time, even before the child turns 18.
How can these accounts benefit your children’s wealth?
There are many ways these junior investment accounts can benefit your children’s wealth, such as:
Achieving your financial goals
Junior investing can help you grow your children’s savings tax-free, so they have a sum of money to help them achieve their financial goals.
You may want to help your children build their wealth for various things. One example could be to pay for educational fees, such as schools or universities. Or, the money could go towards getting on the property ladder by purchasing their first property.
With annual investments in these accounts, you can start growing these savings from early on to build a significant sum of money for certain goals.
A range of account types
Junior investing can also help you grow your children’s wealth by investing in a range of accounts.
For example, you can explore options for both JISAs and GIAs, to receive both benefits. On top of that, you can even invest in two different types of JISAs.
Cash JISAs allow you to save your money in an account, stocks and shares. JISAs help you grow these savings with investments in various securities.
Any growth made from these investments is exempt from income and CGT, so it can be a good way to grow your savings on top of standard JISAs.
Protecting your child’s wealth
Investing in these accounts can also help you protect your children’s wealth.
On the one hand, you can build wealth resilience for your children. There’s no certainty over what could impact your children’s finances in the future, so giving them a significant sum of money in these accounts can help them be prepared to navigate these impacts.
Also, JISAs can’t be accessed until your children turn 18, so their savings are protected from any withdrawals until the time they choose.
With the right approach to junior investing, you can help your children achieve a successful outcome in their financial future. Start exploring your investment options and find out what accounts are most suitable for your family’s financial situation. Please note the value of your investments can go down as well as up.
