Posted 03.06.2020
Saving for your children’s future may seem a long way off.
Whether you’re saving for university or their first home, sowing the seeds early has the potential to bring great rewards when they’re ready to flee the nest.
The March Budget announced an increase of the annual Junior ISA allowance to more than double the previous year. Parents can now invest up to £9,000 for their children, encouraging long-term saving until they turn 18.
The Junior ISA is a fantastic opportunity for many, but clients may wish to look to maximise their own ISA allowances before they consider using their children’s. There is nothing to stop you from investing into your own ISA and simply withdrawing this money and gifting it to your children in the future. If you opt for a Junior ISA and have a little spendthrift on your hands, remember that at age 18 they could access all this money and blow it all on a few weeks in Las Vegas. This would not be the case if the investment were made in your ISA, you would retain control.
If you have fully utilised your ISA allowance and you do want to invest into a Junior ISA for your children, you need to next consider what to invest in. We often meet parents who are holding cash Junior ISA’s. This may not be an appropriate long-term investment.
For long term investments one should consider taking a medium amount of risk. Over time this will potentially be rewarded and short-term volatility should not be a concern in this scenario.
It should be noted that since 2015 parents have been able to switch Child Trust Funds into Junior ISA’s. This is can open up more investment opportunities and the potential for higher returns.
Entering the new tax year, it may be worthwhile for parents to explore their options to see whether they can save more for their children. A Junior ISA might be a suitable option; however, you should contact your financial adviser to discuss your long term investment plan, helping you to prepare your children for adulthood.
If you’d like to explore your options with your annual allowances, call Rhodes Wealth Management on 01332 497670 or email us at rwm@sjpp.co.uk
The value of an ISA at St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested. An investment in a Stocks and Shares ISA will not provide the same security of capital associated with a Cash ISA.
The favourable tax treatment of ISA’s may not be maintained in the future and is subject to changes in legislation.