We all know that bringing up kids is not cheap and financial support doesn’t stop when they leave school; in fact, this is when the “big ticket” expenses kick in; their first car, university, marriage and getting on the housing ladder.
Did you know that in 2018 the bank of Mum & Dad was the 10th largest mortgage lender in the UK?
With youngsters battling to get on the housing ladder, parents in the UK gave or lent their children a whopping £6.3bn to help them with their first home purchase.
And with the average house now priced at 8 times the average salary, home purchase for many young adults will feel like a “pipe dream” unless you can give them a helping hand.
Saving for your kid’s future is like saving for retirement, the earlier you start the better! Do you remember our parent’s advice about pension schemes? Join one as soon as you start work, you won’t regret it… the same applies to little ones, start saving as soon as they are born!
The government realised the importance of this option, so created the Junior ISA (JISA); a savings vehicle with no tax paid on any investment growth or interest earnings. Essentially, it’s a tax-free nest egg.
With the 20/21 tax year came a big change for JISA allowances, doubling from £4,368 to £9,000 per year, per child. Each child under the age of 18 years can have a JISA.. You must be a parent or legal guardian to open a JISA, but once it’s set-up anyone can pay into it. So, Nan and Grandad can start gifting money to the grand kids and help give them a good start to their adult lives.
You control and manage the JISA until the kids reach age 16 at which point it’s over to them, however they won’t be able to start withdrawing money until they’re 18.
When you open a JISA, you will need to decide how you want the money to be invested. There’s a cash option which will generate interest earnings, or you can choose to invest the money for potentially better returns. You can also have a mixture of both; just bear in mind that when you invest, capital is at risk and the value of investments can go down as well as up.
If you’re already saving into a Child Trust Fund you can still open up a JISA but you will need to close the Child Trust Fund and transfer it into the JISA. Your provider will sort this out for you.
You can do a comparison of both products first to decide which one is best for you.
Whichever option you choose, there should be less pressure on the bank of Mum and Dad in the future! Your kids will have their own pot of money to help them into adulthood.
 Macrobond – The Independent