There are many ways to build your child’s wealth, and it’s important to fully understand these processes. One example that you should be aware of, is investing in Junior Individual Savings Accounts (JISAs).
In this article, you’ll learn what a JISA account is, how it works, and how it can be used to effectively benefit your child’s finances in the future. Read on to find out more.
Table of Contents
What Are JISAs?
JISAs are a specific type of investment account designed for children, where you can grow their savings tax-efficiently.
In order to open a JISA for someone under the age of 16, you must be their parent or guardian with parental responsibility.
You can only open one cash and one stocks and shares JISA each year, so it’s worth speaking to your account provider for more guidance on this process.
How Do JISAs Work?
You can contribute a certain amount of money each year into your JISA, and this money is sheltered from tax.
The amount you can contribute is determined by the ISA allowance, which is currently £9,000 for the current tax year, 2023/2024.
These savings are kept in your JISA until your child turns 18, at which point the account becomes a standard ISA and they can withdraw the money tax-free.
No amount can be withdrawn before this point, but anyone can contribute up to the allowance each year.
Also, the total allowance is spread across both types of JISA every year – for instance, you can contribute £4,000 into a cash JISA and £5,000 into a stocks and shares JISA in one tax year.
What Are the Benefits of Investing in JISAs?
Investing in a JISA for your child can bring a wide range of benefits, including:
Tax Efficient Investing for Your Child
One of the main benefits of investing in a JISA is that it provides tax-efficient savings to grow your child’s wealth.
By contributing up to the allowance each year, you can provide your child with a significant sum of money to withdraw when they turn 18. It’s good to note here, that this money will be fully exempt from income or Capital Gains Tax (CGT).
This can be a great way to help your child achieve certain financial goals, such as purchasing their first property or paying for education.
A Range of Investment Opportunities
JISAs also provide a range of investment opportunities to potentially grow your child’s savings.
Cash JISAs are just standard accounts for saving money, but stocks and shares JISAs can allow you to increase your savings with successful investments in certain securities.
Any growth you make as a result of these investments is also exempt from income or CGT, so you can further increase the amount of tax-free money available in the account.
Easy Management and Advice
You can also manage JISAs easily with the help of a modern wealth management service. These providers can not only help you open an account, but also offer expert advice on how to use it to benefit your child’s finances.
For instance, they can help you contribute the right amounts at certain times throughout the year, so you not only maximise your child’s savings, but do so in a way that aligns with your own financial situation.
The more effectively you and your adviser plan your investments, the more chance your child has of a successful financial outcome with their JISA.
Final Thought
Now you have an understanding of how JISAs work, will you be considering these investments for your child’s finances? If so, make sure you contact your modern wealth manager for a more effective approach to your accounts.
Please note, the value of your investments can go down as well as up.
