When looking to build your wealth effectively, it’s a good idea to also begin considering the right way to grow your children’s wealth to protect their future.
With this in mind, many investors opt for Junior Individual Savings Accounts (Junior ISAs/JISAs) for their children.
To help you better understand JISAs, we’ve put together this article to take you through what they are, how they work, and how you can make the most of them for your children. This includes the benefits offered by a wealth management service.
A Junior ISA, which is also known as a JISA, is a unique savings account that allows you to grow savings for your children whilst sheltering the money from tax.
To best understand how a JISA works, let’s first explain what an ISA is. An ISA allows you to contribute a certain amount of money into an account each year, that remains sheltered from tax. As of the current tax year 2023/2024, the ISA allowance is £20,000.
When it comes to JISAs, they operate in a similar way, except the current annual allowance for these accounts is £9,000.
These long-term, tax-free savings accounts provide a great way for you to secure your children’s future and build a good foundation for their wealth.
As mentioned, JISAs allow you to contribute an annual amount that is under £9,000. JISAs can only be opened for under 18s by a parent or guardian, but anyone can contribute to the JISA as long as it doesn’t exceed the allowance.
In order to open a JISA, the child must be under the age of 18 and be a resident in the UK. If you are opening a JISA for a child outside the UK, you must be a Crown servant and the child must depend on you for care.
Once your child turns 18, they can access the savings in their JISA and the account will automatically become a standard ISA for adults.
There are two types of JISAs you can open for your child – a cash JISA, and a stocks and shares JISA.
A cash JISA allows you to save money in an account that is sheltered from tax. A stocks and shares JISA allows the money to be invested, and any growth on the savings will not be subject to capital gains tax or dividends.
You are only allowed to open one of each type of JISA for your child. However, children above 16 can open their own JISA as well as a standard adult ISA if they wish.
If you’re looking to grow your child’s wealth effectively, there are a few things you can do to make the most of their JISA.
The most effective of all these methods is to consult your modern wealth manager. A financial expert will be able to not only provide advice for your own individual wealth but also offer guidance on how you can optimise savings for your family.
Your adviser can assess your children’s JISAs, as well as your own income and financial circumstance, to help devise the right approach for growing the JISAs. This can include any contributions you might currently be making, such as pension contributions, or your own ISA.
This will help you make the right contributions to the JISAs, that not only aligns with your own financial goals and capabilities but also takes into account any goals you have for you and your child’s futures.
With an expert modern wealth manager to consult, you’ll have everything you need to optimise your JISAs, and build your family wealth in the right way.