Ritika Janiya
The number of children holding Junior ISAs worth more than £100,000 has sharply risen from 540 last year to 1,910 this. Some kids have more than £200,000 saved up, so it’s something that parents really need to take action on to protect these savings from inflationary erosion. Junior ISAs are a super way of supercharging kids’ financial futures, but they also take careful management.
Within the past year, there has been a massive jump in the amounts of money that kids are putting away in Junior ISAs. Last year, only 540 children had savings above £100,000. This year, this figure zoomed up to 1,910 young kids. Some even have over £200,000 put away. This can be very big news because it means that parents are putting away serious cash for the future.
So, what is a Junior ISA? It’s a special type of savings account where parents and others can save money for kids without having to pay taxes on it. Kids could start saving from the moment they’re born until they reach 17 years. In that sense, it’s much like the adult savings accounts but differs in a few ways. For instance, the annual contribution one can make to a Junior ISA is £9,000, while that for an adult ISA is £20,000.
That may sound brilliant; however, there is something which every parent needs to be very cautious about. As inflation goes up, the money’s value may fall over time. This means that if you do nothing with your child’s savings, as they get older, their money won’t be worth as much. It’s like saving up a load of money to buy a toy, then suddenly the price goes way too high for what you saved up.
According to Rob Burgeman, an investment specialist, Junior ISAs can help fund big-ticket expenses in the future, be it college or purchasing a house. He went on to clarify, however, that though Junior ISAs have a £9,000 limit, many people have seen how smart investing can sometimes get them much more than this—for instance, successful stocks and shares Junior ISAs that may grow at a far greater rate than just saving cash.
Indeed, Burgeman argues that merely saving money is not going to increase your savings manifold. Rather, investing in stocks and shares could get you much better returns. For instance, he argues that while a cash Junior ISA might grow over the years to about £66,000, with proper investments, that amount is capable of reaching more than £760,000. That is a big difference!
Always bear in mind, though, that no investment exists in the absence of some kind of risk involved. You want to invest only money you can afford to lose. Luckily, Junior ISAs are set up to last for up to 17 years, which gives the money plenty of time to grow.
One thing which may surprise some parents is how large their kids’ savings have grown. With the current limits, not to mention potential for growth, Junior ISAs really can help give a boost to families facing some big future costs. This might include the costs of schooling, purchasing a first car, or even putting down on a house—all of which can be made much more bearable by having a good amount saved up.
Junior ISAs require parents to be quite careful as to how to invest the money. While there is more risk with stocks and shares, they offer potentially better returns. One should therefore balance these against what would be best for your child’s future and what may suit your personal financial circumstances best.
Junior ISAs can be an incredibly powerful tool in saving money for kids. However, smart management is required to ensure that the savings go with the flow of inflation and grow over a period of time. Parents must be sure that their children start life with a financial headstart, for which they should make some wise investments.
So if you’re a parent who has taken out a Junior ISA for your child, now may be the time to consider how it’s doing and how best to get the most out of it. Money saved now really could help later in life—things such as big milestones or providing a sound financial footing.
