Junior ISAs were introduced by the Government in 2011 to help parents and grandparents save for their children’s future. Junior ISAs have a number of benefits when it comes to putting money away for when your children start adult life.
In this article we’ve shared four benefits of JISAs and also a few points to consider if you’re looking at ways to build a nest egg for your kids.
1. Tax-free savings
A major benefit of Junior ISAs is that they are normally tax free so any income, such as interest, or growth in value of investments is free of income and capital gains tax. As with ISAs, Junior ISAs have a tax-free contribution allowance set by the government. The contribution allowance runs to the end of each tax year and then renews and any unused allowance does not rollover. The allowance is the maximum amount that can be contributed in any given tax year to a child’s Junior ISA. The Junior ISA allowance applies to all contributions in total whether the contribution is made by the parent, grandparent or someone else. If the child has a Junior ISA of each type, the contribution allowance is the total across both accounts.
This year (2024/25) the Junior ISA allowance was set at £9,000.
2. Grandparents (and others) can contribute
One of the main benefits of Junior ISAs is that grandparents and other family and friends can contribute directly to the account. We know from firsthand experience how important this is for many families, where often grandparents want to be involved in saving for their grandchild’s future.
How easy this is to do can vary from provider to provider, but at Beanstalk we’ve made it as simple as possible. You can find out more about how grandparents can save for their grandchildren here.
3. Cash and Stocks & Shares available
You can choose whether you would like to have a cash Junior ISA or a stocks and shares Junior ISA or one of both. However, the Junior ISA allowance is the total allowed across both accounts, so you can’t save £9,000 in each.
A stocks and shares Junior ISA invests the money in a range of investment products, such as stocks, bonds, and funds depending on what is offered by the provider.
A cash Junior ISA is similar to a regular savings account and holds money in cash, usually earning interest.
Beanstalk is a stocks & shares Junior ISA. We offer two funds: a shares fund (Fidelity Index World fund) which aims to track the performance of global stock markets and a cash fund (Legal & General Cash Trust fund) which aims to provide returns in line with money market rates.
You can read more about savings vs investing in our article here.
4. Savings are locked away for the child for when they are 18
A benefit that we hear grandparents really appreciate is that parents are unable to withdraw money from a Junior ISA and the gift definitely goes to the child! A junior ISA can only be opened by a parent or legal guardian but the account belongs to the child and any money contributed can’t be withdrawn until the child turns 18 and gets access to the account.
What to consider about a Junior ISA
As with all savings or investment products there are things to consider before you open an account; some of the things to think about before opening a Junior ISA are:
- If you may need access to the money at any point before your child turns 18, then an account where you can withdraw the money would be better suited.
- Inflation can affect the value of your money if you decide to opt for a cash Junior ISA. Interest rates can be relatively low and if inflation is higher than the interest rate, this can mean that the money you contribute may be worth less in the future.
- The performance of a stocks & shares Junior ISA depends on how well the investments do. There is of course a risk that you could end up with less than you put in so if you opt for a stocks & shares product you need to be comfortable with the volatility you may see.
We hope this article has helped answer some questions you may have about Junior ISAs, if you’d like more information you can download our free JISA Guide.