Page 44 - DIY Investor Magazine - Issue 23

WHY I OPENED JUNIOR ISAS FOR MY CHILDREN BY IT INVESTOR
I’ve just listened to an FT podcast about the idea of a Financial Room 101; the redoubtable Justin Urquhart- Stewart suggested we banish Junior ISAs from existence – ‘they’ll either snort the proceeds or drink them’ he said. Or words to that effect.
I have some sympathy with that view, and it’s not the first time I have heard it; nevertheless, a few years back, I opened Junior ISAs for both our young children.
It’s more than a decade until they get their sticky hands on the cash when we’ll know whether Justin was right, but one of the main reasons I did so was to force myself to teach them about finances and investing - if they end up on a spending spree on their 18th birthday, that will be my failing.
THE QUICK AND DIRTY ON JUNIOR ISAS
Junior ISAs (JISA) are essentially shrunken adult ISAs, introduced in 2011 to replace Child Trust Funds; when your child turns 18 their JISA automatically converts into an adult ISA, although they can take control when they are 16. You can put in £4,368 for each child for the 2019/20 tax year and this limit generally rises at the rate of inflation each year.
Like the adult version, JISAs can be either cash or stocks & shares. You can have one cash and one stocks & shares if you wish, up to the annual limit each tax year; permitted investments are in line with ‘regular’ ISAs with the exception of P2P loans facilitated by the IFISA.
There isn’t a massive amount of information available on Junior ISAs but in summary:
In 2017/18, fresh money was added to nearly 1m JISA accounts, with an average subscription of around £1,000. Three times the number of accounts were subscribed to in the year compared to five years earlier.
With around 14m children in the UK, nearly 1m contributing in a single year is significant; less encouraging is that the amount of new money invested has remained at £0.9bn for the last three tax years.
As of April 2018, JISAs were worth a collective £4.15bn - £1.85bn in stocks & shares and £2.3bn in cash; half a dozen Cash JISAs currently offer 3% or more, but I think
more parents should be investing - keeping too much money in cash is far riskier than investing in the stock market over the timeframes we are looking at here.
CHOOSING A PROVIDER
You can open stocks & shares JISAs with most major brokers these days, and there are a few specialist providers as well.
Charges are generally the same as adult ISAs and because smaller sums are involved, percentage fees usually work out cheaper than fixed monthly charges; annual fees typically range from 0.15% to 0.45%. Minimum monthly and lump-sum amounts vary quite a lot, too.
DIY Investor Magazine | Oct 2019 44