If you have a Junior ISA for your child, should you tell them about it? And if so, when?
It’s something I’ve thought about with my youngest daughter Eliza, who is now 11. I’ve always been open with her about her Beanstalk account and every now and then we look at it together.
She enjoys seeing how much is in there and likes looking at the charts showing how the balance has grown over time.
At 11 she’s not going to become an investment expert - I just think her JISA is a useful way to start talking about money, saving and investing and the future.
Making investing normal
One of the reasons I like showing Eliza her account is that it helps make the idea of investing feel completely normal. It’s not something that only people in the City do or something you need to be wealthy to even consider.
The Investment Association recently asked Cash ISA savers who were open to investing how much they thought they would need to have saved before they would feel comfortable investing.
The average answer was an incredible £94,706.
The same report referenced research which found that only 36% of UK adults agreed that “investing is for someone like me”.
There’s clearly still a big perception problem around investing.
You don’t need £95,000 in the bank before you can consider investing. Perhaps a better way to think about cash and investments is to start with when you are likely to need the money.
If you’re saving for something in the short term, or building up money you might need in an emergency, cash may make more sense. If you are saving for something many years away, you might consider investing some of it, accepting that investments can go down as well as up in return for the potential for greater growth over time.
A child with a JISA can have a particularly long time horizon. If you start when they are young, the money could potentially be invested for 10, 15 or even 18 years.
That’s the message I’d like Eliza to take away. That investing isn’t something mysterious or something she should be frightened of; that cash can be useful for the short term and investing is something to consider for the longer term.
Do you need to tell them how much is in there?
Probably not.
There’s a difference between talking to your child about their JISA and telling an 11 year old they have £10,000 or £20,000 waiting for them when they turn 18.
How much you tell them will obviously depend on the child and their age.
For younger children, it might be more useful to show them that you put £20 into their account each month, or that their grandparents added £50 for their birthday.
You can then show them how those relatively small amounts have added up over time.
It’s a simple lesson but an important one: you don’t need lots of money to start saving or investing.
What about when their investments go down?
This is one of the things I find useful about showing Eliza her account - it doesn’t always go up.
If her account has fallen since we last looked at it, we can talk about that too. Investments move up and down and that is part of investing.
We don’t make a big deal of it. Her JISA is being saved for the long term, so what happened to the stock market last week or last month isn’t particularly important to us.
Hopefully that also helps her get used to the idea that investing isn't about constantly reacting to whether markets have gone up or down.
What will they do with the savings in their Junior ISA?
This is probably the bit that worries some parents about telling their children they have a JISA.
Once they know there is money waiting for them at 18, what are they going to do with it?
It could pay towards university, driving lessons, travelling, a first car or eventually a deposit on a home. They could also choose to leave some or all of it invested.
Of course, what an 11-year-old says they would spend the money on may be very different to what they decide at 18.
But that can start some useful conversations about money and choices.
Why wait until 18?
At 18, the child takes control of the money in their JISA.
Personally, I’d rather Eliza had some understanding of her account before that happens than suddenly discover at 18 that she has an investment account and a pot of money to make decisions about.
I have no idea what she will eventually use the money for, and at 11 neither does she.
For now, I’m happy that she knows the whole family have been putting some money away for her, understands a little about what happens to it and, importantly, sees saving and investing as a perfectly normal thing to do.
If that means she grows up thinking “investing is for someone like me”, then I think her JISA will have taught her something useful long before she gets the money.