Let\u2019s face it. When you\u2019re a new parent, dealing with sleepless nights, a bottomless dirty laundry pile, and the flummoxing cost of nappies, child car seats, buggies, baby clothes and myriad other things that babies need, investing for your child may not be top of your priorities. But, when you can find a spare moment, it could be one to add to the list. Here\u2019s why, and what you need to know.<\/p>
Investing for children is pretty much what it says on the tin. It\u2019s putting money into an investment account (rather than a cash savings account) to built assets for a child\u2019s future.<\/p>
Yes. In fact, if you want your child to take advantage of the potentially higher returns of investing over cash savings, you will have to do it on their behalf. That\u2019s because it\u2019s not possible to hold most shares or other investments in your own name until you turn 18. One of the few exceptions is Premium Bonds, which you can buy and own from the age of 16.<\/p>
You\u2019ve probably read (maybe even on the Finder website), that the earlier you start investing the better the chances your money has to grow and meet your investment goals. So it stands to reason that starting out investing in childhood gives the best possible chances of this.<\/p>
While no investing is risk-free, no matter how early you start, investing as early as possible can give your children a good start in life, and the potential to build up a decent lump sum by the time they reach adulthood. This could be used to help pay for university or a deposit on a first home, for example.<\/p>
If you want to invest for your children\u2019s future, you have three main options:<\/p>
Junior ISAS, also known as JISAs, can be opened for any child under 18. They have to be opened and managed by a parent or guardian, but other relatives or friends can also pay in. There are two main types of JISA: junior cash ISAs and junior stocks and shares ISAs<\/a>.<\/p> Junior stocks and shares ISAs typically offer much the same choice of investments as adult stocks and shares ISAs, depending on the investment platform you use. The annual allowances are slightly different though. As of the 2024-25 tax year, adults can save up to \u00a320,000 a year into ISAs, split as they choose across cash ISAs<\/a>, stocks and shares ISAs<\/a>, lifetime ISAs<\/a>, and innovative finance ISAs. For children, you can save up to \u00a39,000 a year split across the two types available.<\/p> Although the parent or guardian holds and manages a junior stocks and shares ISA on their child\u2019s behalf, the money in it belongs to the child. They can\u2019t withdraw the money until they turn 18, though they can take control of managing the account from the age of 16.<\/p>