With over 30 banks and building societies providing the new Junior ISA savings accounts for children, it’s more important than ever to compare Junior ISA terms, benefits, and rates to ensure that your child gets one that is the best fit for them.
Since they come in both cash and stocks and shares option, the first thing to keep in mind as you compare Junior ISA accounts is how much risk you are willing to take on with your child’s nest egg. While cash deposit Junior ISAs are safer, stocks and shares ISAs invest in the market, and these kinds of investments have historically performed better over the long term. This means that if you have 10 years or more until your child turns 18, equity investments may be a better option, as long as you understand that there is a risk of getting back less than you put in.
Planning with children
One way to compare Junior ISA providers and give a little financial education to your child is to go through the process together. Parents can explain to them what savings means, if they don’t yet understand, or go the extra step and discuss why long-term savings is important for the future. Talking about university tuition, weddings, deposits on homes, and other investments with your child will help them understand the importance of their nest egg and make it much less likely that they will ‘waste’ their windfall on something that you, as their parent, don’t approve of.
Once your child turns 18, they will be in full control over their Junior ISA accounts as it will roll into an Adult ISA. This mean there is always the risk that they will splash out on a trip around the world or ‘waste’ the money on something that their parents do not approve of. However, bringing up your children knowing that they will receive a nest egg at 18 – and must be responsible for it – can help put your mind at ease about this risk.
You may want to consider an ethical option when you compare Junior ISA providers, as these generally invest in the FTSE4Good index of companies that meet global standards of responsible investment. These accounts are much rarer among providers, however, so there will be a smaller number of options.
There are accounts that require monthly contributions, accounts that have no requirements besides the minimum balance, and accounts that have no minimum balance at all. Because of the varied nature of this product, comparing Junior ISAs is the only way to be sure your child is getting the best possible fit.