What’s the difference between a Junior ISA and a grown-up ISA?
A Junior ISA is just like a grown-up one, it’s a long-term savings account where any interest you earn is tax free (yep – you read that right, tax free). The amount you can put into a child’s ISA is smaller than the allowance for an adult – for the financial year 2017/2018 the Junior ISA limit is £4,128.
There are two types of Junior ISA available:
- A cash ISA where you deposit money into it like a savings account.
- A stocks and shares ISA, where your money is invested in certain shares and you won’t pay tax on any growth or dividends you get.
You can open one or both types of ISA but bear in mind that you’ll only be able to deposit up to the total tax year allowance between them (this year its £4,128).
With a stocks and shares ISA, it’s important to note that the value of the ISA can increase and decrease according to what the stock market does – so if you’re not a dedicated follower of bulls and bears then a regular cash ISA might be your preferred choice.
If you have parental responsibility, then you can open a Junior ISA on behalf of your child from primary school age to under 18 and as long as they live in the UK. Sixteen and 17 year olds can open their own Junior ISA as well as a regular grown-up ISA (where available) so there’s some serious interest earning potential.
Money in a Junior ISA can only be withdrawn by the child when they turn 18, so you won’t be able to raid the children’s savings for the family holiday.