Investing for children – not just for Christmas

National Savings has closed one option, but there are many more possibilities to consider.

In September National Savings & Investments (NS&I) withdrew the Children’s Bond from sale and launched its first online-only Junior ISA (JISA). The new cash JISA is hardly league table topping: it currently offers only a 2% variable interest rate compared with 3% available from some High Street names.

While interest rates for cash JISAs are generally higher than those available on adult cash ISAs, a cash JISA may not be the best option for a child or grandchild (or anyone else under 18):

  • It is arguable that putting capital on a short-term deposit may not be the most sensible option to maximise returns if the investment is going to be locked away for many years until the child reaches age 18.
  • At age 18, the JISA funds become immediately available to the new adult.

Some families may feel that making a full JISA fund available to an 18-year old is not always advisable. If you’re uncertain about how a young adult might handle their sudden windfall, there are other options.

One is to contribute to a personal pension instead of a JISA, which will effectively lock money away until maybe around the age of 60 for today’s child.

In between the two age extremes, it is possible to use trusts to make gifts to children while still retaining some control as a trustee over when and how funds can be accessed. If you choose the trust route, there are no constraints on the size or type of investment, but the tax treatment may not be as favourable.

For more information on all the options for children’s investments, do get in touch – this is an area with some tricky tax traps for the unwary. 

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax and trust advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.

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