Junior ISA pros and cons

Junior ISAs can help you build a tax-exempt sum of money for when your child reaches adulthood, but the money being locked in could be seen as a good or a bad thing!

Open a Junior ISA
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Ines Pena

Turning 18 is an exciting milestone for your child – and for you as their parent! Having a pot of money ready for when they turn 18 is a great way to give your child a helpful boost into adult life.

But a junior ISA (JISA) isn't right for everyone. We've pulled together an honest list of the benefits and the things to keep in mind to help you decide if you'd like to open a junior ISA or not.

What is a junior ISA?

Junior ISAs (JISAs) are long-term, tax-free savings or investment accounts for children.

They can be opened by the child's parents for any child under 18 years old (under 16 years old for a OneFamily JISA) who doesn't have a child trust fund. If a child does have a child trust fund, it can be transferred into a JISA.

You, and anyone else, can pay up to £9,000 into a JISA each tax year. As the JISA is in the child's name, only they can access the money and only when they turn 18. At this point, they'll be able to decide what they want to do with the money.

What are the pros of junior ISAs?

There are many good reasons to open a JISA and start saving for your child's future.

And opening one early could give your money more time to grow so it can help pay for higher education, driving lessons or even to take their first step on the housing ladder.

Here are some of the main advantages of opening a JISA:

Junior ISAs are tax-efficient

When your child turns 18 and is able to take the money out of their JISA, they won’t pay any Income Tax or Capital Gains Tax.

There’s more than one type of junior ISA

There are two types of JISAs: stocks and shares JISAs and cash JISAs.

Stocks and shares JISAs invest your money in the stock market. They have good potential to grow over the long term but there's a chance your child might get back less money than has been put in, if they withdraw at a time when the value is lower.

With cash JISAs your money can't go down as it's not invested in the stock market. But as it grows by earning interest, there is a risk that it won't keep up with inflation.

That's why we offer a stocks and shares junior ISA at OneFamily.

Money in a junior ISA is locked in

A pro and a con!

The money you invest in a JISA can't be accessed by anyone other than your child, and only when they turn 18. This means that you and your child can't be tempted to dip in early and the money will still be there when they reach 18.

Junior ISAs can help children learn about savings

What better way to teach your children about money than by showing them how their own money is growing?

You’ll have the perfect conversation starter to teach them about the importance of money management, long-term savings and how financial products work.

This will put them in a good position to take control of their JISA once they turn 18, so they can work out how to make it work towards their long-term goals.

Anyone can pay into a junior ISA

Although you can only open a JISA for your own child, anyone can pay into them – they don’t even have to be family!

This makes it the perfect way for relatives or family friends to support your child’s future, especially as a present on special occasions such as birthdays, graduations or Christmas.

A junior ISA could help reduce inheritance tax

A JISA can reduce how much inheritance tax needs to be paid when you die.

Your child won't pay any tax on the money in their JISA, so if you’re putting money aside for when you’re no longer around, you could put some of it – up to £9,000 each tax year, based on the current annual ISA allowance – into a JISA. Their grandparents could do the same, as long as you don't go over that £9,000 a year limit.

What to consider before opening a junior ISA

Like all savings and investment accounts, there are a few things to keep in mind if you're thinking about opening a junior ISA:

Your money is locked in

As above, the money you put into a junior ISA is locked-in until your child turns 18.

While this removes temptation, it could be seen as a problem if you or your child need the money before their 18th birthday or if you decide you'd rather use it for something else.

Inflation can affect the value of a cash junior ISA

If the interest rate you get on cash JISA is lower than the rate prices are going up by (inflation), money held in a cash JISA could be able to buy less in the future than it can today.

Stocks and shares junior ISAs can fall in value

While stocks and shares JISAs are more likely to keep up with, or beat, inflation, the value is likely to go up and down over time. So, your child may get back less than has been put in, if they withdraw when the value is lower.

Weighing up your options

So, is it a good idea to open a JISA for your child?

Well, you'll be building up some money for an excellent 18th birthday! JISAs are tax-exempt, and anyone can pay into the account. It's also a good way to start teaching your child about money and long-term saving.

But, like other savings accounts, there are a few things to consider, especially when it comes to choosing between cash and stocks and shares.

Money saved in a cash JISA can lose value over time if inflation goes up by more than interest rates, while money invested in a stocks and shares JISA is affected by changes in the stock market so the value of your investments could go down.

What would you like to do next?

Open a OneFamily Junior ISA

Start investing for your child's future today.

Open a Junior ISA

Find out more about junior ISAs

Our guides contain everything you need to know to about investing for your child's future in a junior ISA.

Read junior ISA guides

Transfer to OneFamily

Transferring a child trust fund or junior ISA from another provider to OneFamily is simple and we don't charge you to do so.

Transfer to OneFamily

Open a OneFamily Junior ISA

Give your child more options when they reach 18 with our straightforward Junior ISA. Simply choose one of our three climate-focused funds to start investing on their behalf.

Open a Junior ISA
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Our Junior ISA invests in stocks and shares. The value is therefore likely to go up and down over time.

This is normal for this type on investment, but it means there is a risk your child could get back less than has been paid in if they withdraw at a time when the value is lower.

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