Surprise Your Child with a Junior ISA!

The Individual Savings Account (ISA) is still around, and it’s looking better and better. As the economy worsens, it’s time to step back and think about how to protect your family. Of course, many financial guides for the UK touch on this, and encourage you to save. Yet there’s one “gap” that keeps coming up, and we think that it’s time to address it: your children.

You see, saving for the future isn’t something that should be limited only to you and your spouse. It’s something that needs to be taught to our children as well. When children live in a home where good personal finance principles are actually acknowledged and addressed on a regular basis, they are a lot less likely to fall into negative habits that ruin their financial futures. With the credit market cooling, it’s becoming more and more important to be able to have a good credit rating. Savings and borrowing go hand in hand — the more that you can save, the easier it will be to ultimately get what you desire. If you’re thinking about pushing forward into a new financial future and you want to set a good example, Junior ISAs are a good way to go.

You might not recognize the savings program for children, because you might still remember the Child Trust Funds (CTFs) of the past. That program has been phased out and the Junior ISA is the new way to go.

Only the parent or legal guardian of a minor can open up an ISA — but grandparents can deposit money into the account once it’s been opened. Like the regular ISAs, the money deposited is allowed to grow tax-free, and the amount you put in there isn’t subject to tax either. This is a great way to lower taxable income, and it’s an even better way to ensure that your children are safe and taken care of.

It’s also an education thing. Children will get interested in saving if you teach them that it’s a good idea from the very beginning. They can set aside their money over time and you can deposit it into their Junior ISA.

You can also have multiple Junior ISAs, a cash one and an investment one. However, you must make sure that the total limit is respected. The limit increases every year, but it is roughly 3600 pounds per year at the time of this writing.

When your child turns 18, the account will be automatically turned into a standard adult ISA — there’s no paperwork for you to really do. No money can actually be withdrawn by anyone until the child is 18 — then the money is theirs to do with what they wish.

If you’re looking for a good savings vehicle for your children, you really can’t go wrong with the Junior ISA structure — it just works that well!

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