If you’re looking for one of the best ways to build wealth and help your children invest, a junior stocks and shares ISA (JISA) could be your new favourite type of account. Most people aren’t even aware they can invest on behalf of their kids using a JISA.
These accounts work slightly differently to regular ISAs and children’s accounts. So, if you’re looking for the best junior stocks and shares ISA, it’s important to understand how they work to ensure you can maximise the benefits and use these accounts to their full potential.
It’s a tax-efficient investing account, specifically designed for youngsters. These accounts work in quite a similar way to adult stocks and shares ISAs but there are some key differences. With a junior stocks and shares ISA, you can invest up to £9,000 each tax year on behalf of each child.
They can only access the funds when turning 18 and any growth on the investments isn’t subject to capital gains (CGT) or dividend tax, so the junior stocks and shares ISA is one of the best ways for kids in the UK to start building wealth from an early age and a great opportunity for you to start educating them in best personal finance practice.
There’s also a junior cash ISA, which follows similar rules but is only for saving cash and not investing.
Like adult ISAs, junior ISAs are a tax-efficient wrapper, which means that you can invest up to your annual allowance without paying any UK tax on the profits.
The child’s legal guardian or parent needs to open the account, but anyone is able to pay in. So it’s a great account for family and friends to pay into, a productive way for the grandparents to spoil them and help set them up for future success.
There are plenty of UK platforms that offer JISAs, including some of the best trading apps where you could hold your own adult-sized ISA account if you wanted and keep the whole family under one tax-proof roof.
The providers available will differ in what they can offer in terms of investment options, for example the ability to buy shares or a robo-advisor that comes with a ready-made portfolio for simplicity. Think about what it is that you’re looking for, such as whether you want to choose your own investments or if you’d like to choose a portfolio.
With the JISA, you can invest in stocks, shares and other investment types on the child’s behalf. A great benefit to this is that the money is locked in for up to 18 years, so it has plenty of time to (hopefully) grow. Keep in mind, how it performs depends on your choice of investments – the same investing principles and risks apply to kids as well as adults unfortunately.
If your child has a child trust fund, it can be transferred into a JISA. They might have one if they were born between 2002 and 2011. If the child isn’t much of a child anymore and is already over 16, it can be transferred to an adult cash ISA. Otherwise they can access their money at 18 or choose to transfer it into an ISA later down the line. Those aged 16–17 can take out a regular cash ISA to save up to £20,000 per year as well as £9,000 in a JISA.
Junior ISAs are similar to adult ones, except that:
There might seem like there’s not much that separates junior stocks and shares JISAs offered by different providers. However, there are key areas worth digging into that can help narrow down your options when searching for the best UK junior stocks and shares ISA:
There are 2 main ways to invest in a stocks and shares junior ISA:
This option tends to be chosen by people that invest already. That doesn’t mean to say that you shouldn’t go for it if you don’t invest already. It’s where you’d pick out the individual investments for the portfolio – you’d be in charge of making sure it’s diversified and rebalancing it over time. You’d also need to keep an eye on the individual stocks to look at how they’re performing and decide whether you want to sell.
This sounds like a lot of work, but ideally you wouldn’t look at it too often, as a volatile market might spook you into selling. Remember, you have until your child turns 18 to keep this invested, so as long as it’s well diversified, it should have a good opportunity to grow over this time.
DIY portfolios are offered by plenty of investment providers, although finding one that also lets you invest in a JISA is a little harder to come by, but there are plenty of choices available. With DIY options, you would manage the account as if it were your own, but the money would belong to the child named on the account.
Think of these like: Donning the power tools and building yourself a piece of furniture by scratch to fit the exact measurements you need, then decorating it to match your colour schemes.
If you’re not too bothered about choosing individual stocks and shares, or if you’re concerned about maintaining the portfolio yourself, you could opt for a ready-made option. These are offered by providers called “robo-advisors”, but can also be offered by providers that offer DIY investing.
Robo-advisors have a selection of different portfolios that are ready-made. They’ll be presented with defining features that divide them – for example, Wombat has created themed portfolios, such as specifically British companies or companies with female leads. Portfolios are commonly organised by risk – this is a gauge of how much risk you’d be taking on by investing in that portfolio, based on the types of investments it contains. A lower risk score is less risky, but has less profit potential, while the opposite is true of a higher one.
Sometimes robo-advisors suggest a portfolio for you, based on your answers to a short questionnaire. This is like a virtual personal shopper: it matches up how you feel about risk and your investment timelines with the portfolios on offer to help you understand which is best for you.
Robo-advisors are a good choice for beginner investors, but they tend to come with higher costs. Most of the robo-advisors we’ve reviewed on our site offer JISAs, including Wealthify, Moneyfarm and Moneybox.
Think of these like: Popping down to IKEA and getting yourself some ready-made furniture that’s been picked out to match your chosen colour schemes and the theme of your house.
"It depends on the timeframe you’re looking at. A lot of people get confused about junior stocks and shares ISAs (and adult ISAs for that matter), thinking that this account is an investment. Whereas, it’s just an account to actually hold your investments, so the best junior stocks and shares ISA for performance will be the one that’s held the best investments for any given period.
Unfortunately, picking the best investments is an extremely tough task (otherwise we’d all be rich). However, you can give your child’s junior stocks and shares ISA the best shot at success with patience, sensible long-term investment decisions, and keeping your fees low. If they’ve got 18 years for this account to mature, aim for steady-growth rather than risky or volatile options.
There’s no guaranteed path to success with investing but you can increase your chances of success with a sensibly diversified portfolio, all the same investing strategies that apply to adults will also transfer to kids."
These accounts might be suitable for you if you’re happy to lock away the money until the child turns 18. It could also be a good choice if you have a lot to give them (we’re talking up to £9,000 per year).
This depends on several factors:
Any UK shares that are traded electronically incur 0.5% stamp duty reserve tax. You may also need to consider inactivity fees, which are fees charged to you when you’re not using your account.
Our comparison table details some of the main fees on these accounts.
Junior stocks and shares ISAs are the best and most tax-efficient way to invest for your child’s future. Parents tend to choose them because they lock away any savings until the child is 18, meaning plenty of time to save and invest, hopefully allowing the pot to grow without needing to pay any UK tax on possible profits.
However, with any form of investing comes an element of risk and the responsibility is on you to decide how you choose to invest the money. There are no guarantees and you may get out less than you put in, because even if you use the best junior stocks and shares ISA you can possibly find, that doesn’t mean you’ll automatically find the best investments.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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