Junior ISAs: how to save for your children’s future

As parents, one of the greatest gifts we can give our children is financial wellbeing – and one of the best ways to do this is via a Junior ISA (Individual Savings Account).

The £100 rule and why it matters

When I first started saving for my own children, I was surprised to learn about the £100 rule.

Many parents don’t realise that if you save for your child – even in a bank account in their name – any interest or income over £100 per year is taxed as if it were yours.

This rule exists to prevent parents from using a child’s tax-free allowances to reduce their own tax liability

It often catches people out, but there’s a simple option to prevent it: Junior ISAs.

What is a Junior ISA?

A Junior ISA allows you to invest up to £9,000 per year tax-free, and the money belongs to the child, so the £100 rule doesn’t apply.

What are the advantages of saving via a Junior ISA?

The plus points of Junior ISAs include:

• Tax-free growth: you can invest up to £9,000 per child per tax year (2024/25 limit), and all gains remain tax-free
• Locked until 18: funds can’t be accessed early, which helps teach financial responsibility
• Compounding power: starting early means even modest monthly contributions can grow significantly over time

Are there any drawbacks to a Junior ISA?

The potential disadvantages of Junior ISAs include:

• No parental access: once the money is in, it belongs to your child
• Contribution limits: you can put in a maximum of £9,000 per year per child
• Market risk (for Stocks & Shares JISAs): the value of the money in their account can go down as well as up, depending on the performance of your investments
• No parental say: once your child is 18, they have full control over their ISA so they can spend it on whatever they like, however quickly they like

Who can contribute to a Junior ISA?

It’s not just parents who can contribute and make a difference. Junior ISAs (JISAs) allow anyone – grandparents, godparents, relatives, or family friends – to contribute towards a child’s future in a tax-efficient way.

Grandparents often want to contribute to their grandchildren’s future, and Junior ISAs make this simple.

Grandparents can gift directly into the account without affecting their own inheritance tax position, provided they stay within gifting allowances

What are gifting allowances for grandparents?

The annual gifting allowance is £3,000 per year per person with one-year carry forward allowed without impacting inheritance tax.

You can also make regular gifts from income. These can also be exempt from inheritance tax if they don’t affect the giver’s standard of living. To qualify, these must be regular gifts and come from surplus income.

This means grandparents can play a huge role in building a financial foundation for the next generation.

When should I start a Junior ISA for my child?

The earlier you begin saving, the more time your money has to grow. Even small, regular contributions can accumulate significantly thanks to the power of compounding.

How much could be saved?

For an example, saving £100 a month from birth to 18 could grow to over £38,000 by age 18 (assuming a medium risk 5.78% growth rate before any fees or charges).

That’s enough to make a huge difference in their lives and give them a great start to adulthood.

Balancing Junior ISA saving with your own goals

Saving for your children doesn’t mean neglecting your own goals. A well-structured financial plan can balance both, ensuring you stay on track for retirement while supporting your family’s future.

How can a financial adviser help?

It is in situations like this that taking expert advice from a financial professional before making any decisions is crucial.

Tailored advice for your family’s long-term plan

A financial adviser can look at the whole picture, taking into account your individual circumstances and financial and life goals, and give you the advice which works best for you and your family.

Key takeaways – is a Junior ISA right for your child?

Whether it’s helping them through university, supporting their first home purchase, or simply giving them a head start, saving for your child is hugely valuable.

With the £100 rule restricting how much your child’s savings can grow, Junior ISAs are a useful way to invest tax-free in their financial future.

Junior ISAs can also help teach children about the value of money. Not only will this be useful when they become old enough to access the account, it’s knowledge which will stand them in good stead their whole lives.

Get in touch today to talk to us about opening a Junior ISA for your child or any other aspect of family finance.

Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. Always seek professional advice before making financial decisions.