A Junior Isa taught my son about saving
A Junior Isa taught my son about saving… and gave him £8,000: How to engage your children with money and benefit from rising interest rates or investing
Parents and grandparents looking to help a child build a nest egg can take advantage of the increased competition among Junior Isa providers in recent weeks, which has resulted in rising interest rates and falling rates on some of the best deals.
Cash Junior Isa yields have risen to four per cent, with Coventry and Skipton building societies both offering this rate.
Hargreaves Lansdown threw down the gauntlet on equities and equity Junior Isa providers by effectively freeing up his HL Junior Isa’s to manage.
On the rise: Cash Junior Isa returns have risen as much as 4% in recent weeks
Rival wealth platform Interactive Investor allows clients to open a Junior Isa for free as part of their Investor Plan or Super Investor plans. They can get as many free Junior Isa’s as they have children.
Investment platform Fidelity does not charge platform fees on Junior Isas.
If you haven’t checked your child’s Junior Isa in a while, it may be worth doing so. If you’re paying a fee for a stock version or getting a rate much less than four percent on a cash Junior Isa, ask yourself if you’re still getting your money’s worth.
A Junior Isa taught my son to save – and gave him £8,000
Money Lessons: Catherine Thomas Humphreys and Toby
A junior Isa offers a great opportunity to teach your child about money and the importance of saving so hopefully they don’t blow up the money once they have access to it.
Catherine Thomas Humphreys of Chesterfield used her son’s Junior Isa to teach him how to save. She opened the account for Toby, now 20 and a paraplanner in training, when he was a child. By the time he had access to it, he had an £8,000 nest egg.
“Toby supplemented his Junior Isa with money he had saved from birthdays and newspaper rounds,” says Catherine.
“When he turned 18, he spent some of his money, put some in emergency money, and kept the rest in Isas.”
Investment or Cash: Which is Best for Kids?
The only major difference between a Junior Isa and an adult Isa is that only £9,000 can be put into a Junior Isa each tax year and access is not possible until the child turns 18.
Kids can have money or an investment Junior Isa – or one of each, as long as they don’t exceed the £9,000 limit.
Cash Junior ISAs are by far the most popular. But it’s the Junior Isas investments that bring the greatest reward in the long run.
For example, if you put the entire £9,000 allowance into investments and assume an annual growth rate of five per cent, you would have £244,192 after 18 years.
If you deposited the same amount into a Junior Isa in cash at an average annual interest rate of 1.5 per cent, you would build a nest egg worth £197,634 – £46,000 less – in 18 years. Interest rates on the best accounts are currently higher, but have averaged around 1.5 percent in recent years.
Many children can choose to access their Junior Isa when they turn 18.
However, if they left it untouched in shares of Isa and it continued to grow at five per cent a year, with no further deposits, it would be worth £460,459 when they turned 30.
Leave it alone until the child is 65 and they would have a pension savings worth £2,539,901 – all protected from the IRS.
Sarah Coles, head of personal finance at Hargreaves Lansdown, says: ‘Parents can be wary of investments because they see them as risky. But while there will be ups and downs in the short term, they usually outperform cash in the long run.
“Cash, meanwhile, runs the risk of not keeping pace with inflation.”
> The best Junior Isa cash rates: View our savings tables
Why do children need a tax paper?
If they earn more than £1,000 in interest in a tax year, they pay income tax on the excess. If their money is invested, they are subject to the same capital gains and dividend tax deductions as everyone else.
Anyone can deposit into a Junior Isa, but a parent or guardian must open the account. They are a good option for grandparents who want to hand over money during their lifetime but don’t want their grandchildren to have access before they turn 18.
Donations are generally exempt from inheritance tax if the donor lives seven years after the donation.
Compare the best DIY investment platforms and stocks Isa
Online investing is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.
When it comes to choosing a DIY investment platform, stock Isa or a general investment account, the range of options seems overwhelming.
Each provider has a slightly different offering, charging more or less fees for trading or holding stocks and giving access to a different range of stocks, funds, and mutual funds.
When weighing up the right one for you, it’s important to look at the service it offers, along with handling fees and transaction fees, plus any other additional fees.
To help you compare the best investment accounts, we’ve put together the facts and put together a comprehensive guide to choosing the best and cheapest investment account for you.
We highlight the key players in the table below, but we encourage you to do your own research and consider the points in our full guide linked here.
>> This is Money’s full guide to the best investment platforms and ISAs
The platforms below have been independently selected by This is Money’s specialist journalists. If you open an account through links marked with an asterisk, This is Money earns an affiliate commission. We will not allow this to affect our editorial independence.
| Management fees | Loads notes | Fund trading | Default share, trust, ETF trading | Invest regularly | Dividend reinvestment | ||
|---|---|---|---|---|---|---|---|
| AJ call* | 0.25% | Max £3.50 per month for stocks, trusts, ETFs. | £1.50 | £9.95 | £1.50 | € 1.50 each | More detail |
| Bestinvest* | 0.40% (0.2% for pre-built portfolios) | Account fees reduced to 0.2% for turnkey investments | Free | £4.95 | Free for funds | Free for income funds | More detail |
| Charles Stanley directly | 0.35% | No share platform fees on any transaction in that month and an annual cap of £240 | Free | £11.50 | na | na | More detail |
| Fidelity* | 0.35% on funds | £45 fee up to £7,500. Max £45 per annum for stocks, trusts, ETFs | Free | £10 | Free funds £1.50 shares, relies on ETFs | £1.50 | More detail |
| Hargreaves Lansdown* | 0.45% | Capped at £45 for stocks, trusts, ETFs | Free | £11.95 | £1.50 | 1% (£1 min, £10 max) | More detail |
| Interactive investor* | £9.99 per month, or £4.99 under £30,000, £12.99 for Sipp | £5.99 a month back in free trade credit (does not apply to a £4.99 subscription) | £5.99 | £5.99 | Free | £0.99 | More detail |
| iWeb | £100 one-off | £5 | £5 | na | 2%, up to £5 | More detail | |
| Etoro* | Free but no Isa or Sipp | Investment account offers stocks and ETFs. Beware of high risk CFDs on a trading account | Not available | Free | na | na | More detail |
| Free trade* | Free for Basic account, £4.99 per month for Standard with Isa | Freetrade Plus with more investment and Sipp is £9.99/month inc. Is a fee | No funds | Free | na | na | More detail |
| Forefront | 0.15% | Only Vanguard Funds | Free | Free Vanguard ETFs only | Free | na | More detail |
| (Source: ThisisMoney.co.uk Jan 2023. Administration fees may be levied monthly or quarterly | |||||||