Posted in: Family Last updated: 04 May 2015

Considering your options

When opening a Junior ISA for your child, one of the big decisions you need to make is whether you choose an account that invests in cash, an account that invests in stocks and shares, or a combination of the two.

Cash accounts are generally considered the safer of the two, as they grow steadily according to the interest rate applied to the account. But below, we look at recent research showing that stocks and shares could provide a greater opportunity for growth over the long-term.


Please note that the information provided below is for your reference only and are based on general market information, not our own data. These figures should not be considered an indication of future performance. The performance of individual funds will vary. If you are unsure about the suitability of any of the different savings options available, we recommend you speak to an independent financial adviser.

Cash and stocks and shares accounts

What’s the difference?

 One useful feature of the Junior ISA is that you’re not tied in to one kind of account. You can spread your child’s money across a cash account and a stocks & shares account, or transfer between accounts and providers as you see fit.

The differences between the accounts are straightforward:


Put simply, cash Junior ISAs work much like a typical bank or building society account.

Money put into the account earns interest and generally will not fall in value except in the unlikely event of the account charges being higher than the account interest rate.

But although the value of the account won’t go down, you should consider the effect inflation will have on your savings. If the interest rate of the account doesn’t keep pace with the rate of inflation, the money in the account will not be able to buy as much in the future as it can today.

Stocks & shares

Stocks & shares (or ‘equity’) Junior ISAs, on the other hand, invest in the stock market, so they have the potential for greater growth than cash accounts, which we’ll illustrate later in this article.

However, this comes with a degree of risk. The value of stocks & shares can go down as well as up. While this is normal for stocks & shares, it does mean there is a chance that your child will get back less money than you invest.

How are other people saving?

The Junior ISA only launched in 2011, so we don't have figures going back beyond that point. However, you can see from the 2012-2013 figures that the majority of people have chosen cash accounts.

cash vs stocks and shares

How does each option perform?

cash vs stocks and shares

Although money invested in a cash account will not decrease in value, cash accounts typically offer less potential for growth over the long-term than a stocks & shares account.

In fact, according to the Barclays Equity Gilt Study – the UK’s leading source of information on long-term market returns – stocks & shares have, overall, outperformed cash/building society accounts over every 18 year period during the last 50 years.

If we compare equity growth rates taken from the 2015 Barclays Equity Gilt Study against the average interest rates for cash ISAs over the past few years we can see that, overall, stocks & shares generally delivered greater growth.


cash vs stocks and shares

Source: Defaqto (average rates 2009 to 2012) and the BBC (average rates 2012-2014)
Source: Barclays Equity Gilt Study 2015

Past performance is no guarantee of future performance. The value of the account can decrease as well as increase. If the account is cashed in when the stock market is at a low point - as during the period of 2011-2012 shown in the graph above, for example - then there is a risk that you might get back less than is paid in, depending on the point at which your money was originally invested.

You should also keep in mind that the figures shown above are based on average figures and that the performance of specific Junior ISA funds will differ from the figures shown here. The Junior ISA was launched in 2011, so figures up until this point are not necessarily relevant to this product.

For information about how Family Investments' funds have performed over the past five years, you can download factsheets for the relevant funds. Our Junior ISA invests in either the Family Balanced International Fund or the Family Charities Ethical Trust.

Other things to consider

Although the information above may be useful in considering investment options for your child, there are several other considerations you should take into account when choosing where to put your child's money:

  • you'll need to think about your own personal circumstances

  • what your overall goal is for your child's money

  • whether you're willing to take the risk that comes with investing in the stock market

  • whether you're happy for the money to be tied up in a Junior ISA as only the child can access the money and only at age 18.

Ultimately, whether you're investing for yourself or for a child, it's down to you to decide what's right for you and your family. If you're not sure whether a product is right for your needs, you should always take advice from an independent financial adviser.

cash vs stocks and shares illustration height chart

Note: Whilst we take care to ensure Hub content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions. OneFamily do not provide advice so it may be worth speaking to an independent financial advisor about your own circumstances.