Something we occasionally hear from parents when they explore setting up a Junior ISA is whether their child will be mature enough to handle getting access to the money at 18. Will the young adult blow it all extravagantly rather than putting it towards something more sensible?
We’ve been looking into the behaviour of our matured Junior ISA account holders and talking to some of those young people, and we suspect parents may be pleasantly surprised at how sensible they are.
The value of Junior ISAs on maturity varies widely from a few hundred pounds to tens of thousands, but on average at 18, Junior ISAs mature with values well in excess of £5,000 in them. This is a significant amount with the potential to really help the young person get set into adult life.
One concern we’ve heard is that the 18 year old will withdraw and spend everything once they get their hands on it. In fact, we’ve seen the opposite with the majority of people withdrawing only a small part for specific purposes and keeping the rest invested for specific future goals. In total we see only about a fifth of maturing balances being withdrawn within 18 months of the Junior ISA maturing. The accounts where everything has been withdrawn also tend to be those with smaller balances when the child turns 18, typically less than £1,000.
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When speaking to some of our matured JISA account holders about their plans for the savings in their account, the most common answer was to help with university costs although putting the funds towards a first home or travelling were also cited. Most of the sample we spoke to said they planned to continue saving and it was clear that they understand the importance of doing this.
For those that have withdrawn some of the savings they provide examples of using the money for driving lessons, tutoring fees and general living costs.
It is clear from our survey that the young adults felt they were mature enough to receive the funds with 90% saying yes to the question “do you feel you were responsible enough to receive your Beanstalk account at 18?” and many talking about how they felt they were “wise with money” and “good at restricting my spending”. Our observation is that the concern about potential risk at 18 seems to be strongest amongst parents with very young kids; parents with experience of older children perhaps are beginning to see that children really do grow up as they get older.
These attitudes and behaviours come from having some kind of financial education as almost all of the young people we’ve spoken to say they’ve had this from school, their parents or online.
Our survey showed that parents typically told their child about their Junior ISA once they were teenagers, mostly when they were 16 or 17 (although some were as young as 12). 60% of parents gave advice on how to use and manage the money in the account. Not unsurprisingly 100% were delighted to hear the news!
The secondary school curriculum now includes personal finance, introduced in 2014 following funding by Martin Lewis and created with financial education charity Young Money. You can download the textbook used for free. There are also many other resources out there to teach your children about money in an age appropriate way, so don’t worry if you don’t feel knowledgeable enough to do it yourself. Moneyhelper.org.uk has a section on their website where they share tips and guides split into ages.
We hope this article gives you some reassurance that giving your child access to their savings at 18 doesn’t spell disaster and in fact they’ll most likely use it to help successfully take their first steps into adult life and beyond.