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Setting Up a Junior ISA

Kids are expensive – in fact, a recent survey suggests that most parents will need to dish out around £148,000 just so their child can make it to adulthood. But when they reach 18, they face the real world. Still, it’s always nice to allow them accessible funds as they fly the nest, and that is easier than ever thanks to Junior ISAs.

There are currently around six million children eligible for Junior ISAs; those born before September 2002 or after 3 January 2011. With Junior ISAs being a new tax-free solution to saving for children, it’s certainly worth finding out how Junior ISAs can work for you.

How It Works

The official definition of a trust fund is “a legal ownership of assets provided by a granter to a beneficiary and governed by a trustee.” In the case of a child’s trust fund, the granter would be the parent or guardian that was investing into the child, with the child being the beneficiary, and the trustee usually being the chosen bank.
Savings can go towards future expenses, such as a first car or home
Child’s trust funds were originally introduced by the government as a way of ensuring that most children in the UK would have savings by the time they were 18. They have recently been replaced by Junior ISAs (Individual Savings Accounts), which essentially serve the same purpose.

Granters can deposit up to £3,600 a year into a Junior ISA, but the child selected as the beneficiary can only access the account when they are 18. This is an ideal way of supplying a child with enough money to start off their adult life; it can help with university fees, finding a house, and buying a car.

The Benefits of a Junior ISA

If you want to invest into your child’s future securely, trust funds are a way of doing so with tax benefits. Any money that you put into a child’s trust fund is protected from the taxman, meaning that when your child has come of age, they will have full access to every penny that you have gifted to them over the years.
Junior ISAs are a secure, tax-free way of saving
Junior ISAs can be set up just as quickly and simply as a current account, and can be monitored alongside your other accounts thanks to online banking. Because Junior ISAs are becoming a more competitive industry, a lot of banks are offering some great deals; some only require a minimum balance of £1.

How to Set One Up

With most banks, setting up a Junior ISA is relatively straightforward. You’ll usually need to either set up a direct debit to feed into the fund, or come with a lump sum to kickstart the account. Once the account is opened, you can money in whenever you like online or in the bank. This is ideal for putting away money received at birthdays or family occasions, to save for the future.

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