Paying into a Junior Isa is the best way to save money for your kids or grandkids, says Paul Lewis
What is the best way to save some money for my children or grandchildren? It’s a question many people ask, and the answer is often a Junior ISA (JISA). If a child already has one, then putting money into that is the simplest way for grandparents and others to contribute. A JISA can only be opened by a parent or guardian – but once opened, anyone can pay into it. The maximum contribution allowed is £9,000 per tax year, from all sources combined. An astonishing 78,000 JISAs have that maximum paid in each year; but, at the other end, almost a million had nothing paid in at all in 2023/24 (the latest figures).
Junior ISAs come in two flavours: cash or investments (which usually means shares). A child can have one of each but, unlike adult ISAs, not more than one. The maximum that can be paid in is £9,000 a year across them both. Any interest or dividends earned are free of income tax but most under-18s do not pay income tax anyway so a more important consideration is the return: the top five Junior Cash ISAs pay 3.6% to 3.85%, so aim for something like that. Those rates are less than best-buy adult ISAs where a five-year fixed rate is over 4.4% and the best instant access account is higher than that. However, Junior ISAs pay more than most banks do on ordinary children’s savings accounts. Building societies are better – some pay up to 5% – but often with conditions attached. Find the best rates by searching theprivateoffice.com for ‘cash’, or googling ‘moneyfacts kids accounts’.
The money in a JISA belongs to the child and cannot be taken out until they reach 18, though they can manage it from 16. Once they become an adult the money is theirs and is automatically transferred to an adult ISA. They can then take it all out at once if they choose.
Meanwhile, children born on 2 January 2011 or earlier will have a state child trust fund in their name and cannot have a JISA as well. Anyone can pay money into a child trust fund subject to the same £9,000 total annual limit. Children can find details of their Child Trust Fund at sharefound.org.