Savings for children: Junior ISAs could create ‘millionaires’ in the future

Junior ISA: Nationwide explain benefits of setting up account

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On The Money to the Masses podcast, personal finance expert Damien Fahy discussed the benefits of parents opening up a Junior ISA for their children. When investing parents need to be thinking long term. It is the power of compounding that can really make one’s money grow, Damien suggested.

He said: “People can invest little money into a Junior ISA each month and could end up making their child a millionaire in later life, that’s why you would want to engage with Junior ISAs.

“They are 10 years old now and for me personally, I engage with Junior ISAs for my children, and I don’t put in large amounts of money, it’s more about doing regular, small amounts.

“This can grow over time, and I can choose the investment to try a maximise those potential returns.”

Junior ISAs are products that people can use to save or invest for their child’s future.

Junior ISAS can be opened from birth up to age 16. At age 16, the child can take control of the money and choose where it is invested but they can’t make a withdrawal.

Once 18, they will be able to access the money and can either keep this in savings or withdraw the cash.

Another benefit that Damien mentioned is that grandparents and other people can pay into a Junior ISA once it is set up by the parents.

It can be a great way to invest or start to build a pot of money for a child future.

He explained that changes to the Junior ISAs should make it a more attractive form of savings for parents.

“Even if people start with putting in £5 a month it will all amount up over time”, he said.

Calculations by Junior ISA provider AJ Bell suggest parents putting away the full £9,000 a year into a Junior ISA investing in stocks and shares which yielded average returns of 5 percent could potentially have £265,000 by their 18th birthday.

But even if families don’t have this much to invest, the benefit of Junior ISA investing are still attractive.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Some of our clients have put together really impressive Junior ISA portfolios of tens of thousands of pounds.

“But you don’t need to set aside a fortune to make a real difference to your child’s future.

“If you invest as little as £25 a month and talk to your children about their investments as they grow, you can also help build their interest and understanding of investments.

“It means they won’t just start their adult life with a nest egg, they’ll also have become investors, which can make a profound difference throughout their lives.”

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