Using a Junior ISA to Save Money for your Child's Future

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Using a Junior ISA to Save Money for your Child's Future
A few decades ago, the money that a baby received when it was born was put into a savings account at a bank or building society, and any subsequent birthday and Christmas money added to it.

This would then be given to child when they reached 18 and viewed as a responsible adult who could take care of this often modest sum of money, as the interest rates were far from favourable. Today, however, this is a very much outdated option, and with the arrival of the new junior ISA which came into effect in November 2011, to replace the now defunct Child Trust Fund, the options broadened once again. ISA's have proved to be very popular as means of saving, and it was really only a matter of time until something similar was introduced for children, and now we have it.

New Junior Isa

There are distinct differences between an adult ISA and a junior one, as you would expect, but these seem to err on the side of common sense rather than complicate matters. One example is access to the money in the fund, once paid in to the junior ISA it cannot be withdrawn, and is locked there, earning interest, until the child who it has been opened for turns 18.

The allowance is a lot less too, with a maximum yearly allowance, at the minute, of £3600 a year. This is a lot less than the £10,000+ you can invest in an adult ISA, but you have to bear in mind that this is
family having fun
being invested on behalf of the child, not by them themselves, and as most parents will probably have an ISA of their own, a lower maximum allowance seems to make financial sense.

Higher Interest Rate

There will be older family members who are very stuck in their ways, and want to stick with the traditional savings account. It is worth pointing out to them the much higher interest rate that is gained from a junior isa, and how much more money the child will receive on maturity. It is also worth pointing out that the money is locked away and is only accessible by the child when they turn 18, so they should have no worries about it being 'dipped into'.

While there were many fans of the CTF, it has gone, there is nothing we can do about that, and its replacement isn't such a bad option when you look into it. There is also the option of splitting the yearly allowance between a cash element and a stocks and shares element. You can either have one or both running alongside each other, and if you are prepared to take a bit of a gamble with the stocks and shares one you can gain a greater yield.

A junior ISA is certainly a strong candidate if you are looking to invest some money for your child's future, and there is no other savings account will give the same rate of interest, and give your child a greater yield in 18 years time.

To find out more about the Junior ISA visit www.juniorisas.org where you can compare different accounts from many of the leading junior ISA providers.

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