With children breaking up for the school holidays and University students returning home, thoughts may turn towards younger children and grandchildren going to university or further education and how to support this financially.

A Junior ISA is an excellent way to save towards your children or grandchildren’s future, whether that be through support for Education, a house deposit or even help towards a wedding. An ISA is an ideal investment vehicle to help you as parents or grandparents save for your loved ones.

You can choose either a cash Junior ISA or a Stocks and Shares Junior ISA. It is important to consider your own risk tolerances, comfort levels and time frames for when your children/grandchildren will access these funds. These factors will all play an important part in the consideration of a cash JISA or Stocks and Shares JISA.

At this stage it is important to consider the implications of investing into cash or the investment markets. Cash can provide a safe haven and is low risk but provides very little opportunity for growth over the long-term particularly with inflation eroding the real value of the funds. Investment into Stocks and Shares can provide potential real growth above inflation over the long-term, but the funds are exposed to investment risk and the value may reduce during times of market volatility.

JISAs have been available since 2011 and replaced the Child Trust Funds (CTFs). The subscription limit to a JISA for the 2021/22 tax year is £9,000, which can be made to cash, stocks and shares or a combination of the two.

Parents or grandparents of the JISA can be the registered contact but it is important to remember that you cannot access the money added to a Junior ISA. When a child reaches age 18 the JISA will automatically convert to an “adult” ISA and remain within the tax efficient ISA wrapper. At the age of 18 withdrawals can be made from the JISA and control of the investment is passed from the parent/grandparent to the child.

With access to the funds available at age 18 it will be important to discuss with your children/grandchildren your reasons for saving towards their future and what you hoped the money would go towards.

Matthew Lawton