Junior Isas provide a tax free way of saving money for children under the age of 18, and are easily accessible for parents or guardians to open.
Types of Junior ISAs
Junior ISAs are similar to regular Isas and there are two broad types:
Junior Cash ISAs - These work in the same way as a normal cash Isa, but any money paid in will earn interest tax-free.
Junior Stocks & Shares ISAs - With these you can invest money into funds, stocks, shares, investment trusts, and corporate bonds. If you're confident with investments these can make much more than cash ISAs, but carry the risk that your investments might drop, and therefore your child's savings will also decrease.
Most providers offer the ability to use a mix of the two types if you choose.
How much can I put aside?
The annual contribution limit at the moment is £4,080. Despite children having their own personal tax allowance, it's not possible for you to invest large sums to use this allowance as it is deemed tax avoidance. However children aged 16 and 17 can also contribute to their ISA with the tax free amount raised to £15,480 for those years.
When can my child access the money?
Any money placed into the ISA will not be accessible for your child until they turn 18 years old.
How many junior ISAs can I have?
Unlike adult ISAs, you're restricted to one junior ISAs for tax reasons. Alternatively you can have one of each variety (cash, stocks & shares) but the tax free amount is divided across the two. If you find a better deal with another provider, you can switch across but will have to transfer the whole balance to the new account.
Does the government make contributions?
Junior ISAs have replaced child trust funds, which the government used to deposit £500 in, when the account was first opened. Unfortunately the government makes no such contribution to junior ISAs.
Child trust funds have a reputation for offering poor interest rates, and if you have an existing child trust fund, you should consider looking into transferring it to a junior ISA in order to get a better deal. Read more about this in our guide 'Transferring Child Trust Funds to Junior ISAs'