Page 44 - DIY Investor Magazine - Issue 23
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I’ve just listened to an FT podcast about the idea of a Financial Room 101; the redoubtable Justin Urquhart- Stewart suggested we banish Junior ISAs from existence – ‘they’ll either snort the proceeds or drink them’ he said. Or words to that effect.
I have some sympathy with that view, and it’s not the first time I have heard it; nevertheless, a few years back, I opened Junior ISAs for both our young children.
It’s more than a decade until they get their sticky hands on the cash when we’ll know whether Justin was right, but one of the main reasons I did so was to force myself to teach them about finances and investing - if they end up on a spending spree on their 18th birthday, that will be my failing.
Junior ISAs (JISA) are essentially shrunken adult ISAs, introduced in 2011 to replace Child Trust Funds; when your child turns 18 their JISA automatically converts into an adult ISA, although they can take control when they are 16. You can put in £4,368 for each child for the 2019/20 tax year and this limit generally rises at the rate of inflation each year.
Like the adult version, JISAs can be either cash or stocks & shares. You can have one cash and one stocks & shares if you wish, up to the annual limit each tax year; permitted investments are in line with ‘regular’ ISAs with the exception of P2P loans facilitated by the IFISA.
     There isn’t a massive amount of information available on Junior ISAs but in summary:
In 2017/18, fresh money was added to nearly 1m JISA accounts, with an average subscription of around £1,000. Three times the number of accounts were subscribed to in the year compared to five years earlier.
With around 14m children in the UK, nearly 1m contributing in a single year is significant; less encouraging is that the amount of new money invested has remained at £0.9bn for the last three tax years.
As of April 2018, JISAs were worth a collective £4.15bn - £1.85bn in stocks & shares and £2.3bn in cash; half a dozen Cash JISAs currently offer 3% or more, but I think
more parents should be investing - keeping too much money in cash is far riskier than investing in the stock market over the timeframes we are looking at here.
You can open stocks & shares JISAs with most major brokers these days, and there are a few specialist providers as well.
Charges are generally the same as adult ISAs and because smaller sums are involved, percentage fees usually work out cheaper than fixed monthly charges; annual fees typically range from 0.15% to 0.45%. Minimum monthly and lump-sum amounts vary quite a lot, too.
DIY Investor Magazine | Oct 2019 44

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