Understanding Junior ISAs
If you are looking for a good way to save some money for your children and you don't want them to be able to access it until they're 18, then you should look into setting up a Junior ISA in their name. Junior ISAs are just like normal ISAs in terms of the fact that they are protected from tax and they come in various different shapes and sizes.
What exactly are Junior ISAs?
Junior individual savings accounts work in a very similar way to standard individual savings accounts. All the money that you earn through interest is tax free, this means that you can reap the full reward of anything that you have saved away. This type of individual savings account was introduced in order to replace the Child Trust Fund.
Child Trust Funds were discontinued back in August 2011 when the Junior ISAs scheme was brought in. They differ in a few ways but most notably, Junior ISAs receive no cash contributions from the state.
Which children are eligible for Junior ISAs?
Every child that meets the following criteria is eligible for a Junior ISA:
- They do not have a Child Trust Fund
- They were born after or before 1st September 2002
- They did not qualify for a Child Trust Fund and were born between 1 September 2002 and 3 January 2011.
The advantages of Junior ISAs
There are a few different advantages to taking out a junior ISA for your child. One of the biggest changes to the Child Trust Fund scheme is that you can have Junior cash ISAs and Junior stocks and shares ISAs. This means that you can invest with money deposited in the traditional sense and earn profit via interest or you can put investments into the stocks and shares market. All of the profits that you make on a junior ISA is completely tax free. This account will be turned into a standard ISA once your child turns 18.
Different Types of Stocks and Shares
There two different forms of Junior ISA - the same two forms that you can find standard ISAs in, stocks and shares and cash. You are permitted to set up both forms of ISA at once if you so wish, the cash ISA will pay out in the form of interest and the stocks and shares ISA will provide a tax free investment.