Investing for your Children

I have a four year old, and I have invested in what is termed a “Jisa” or Junior ISA.  As long as the child is under 18, they qualify.

Thanks!  How are they differnent to Adult ISAs?

They work on the same tax free system but the key difference is that they offer a much higher interest rate.  I was allowed to put in £4128 for him. That’s the max, but you don’t have to pay in that much, you can pay in monthly if you want.

That’s all well and good, but the major drawback is that you are locked in until the child is 18, then they have direct access.

I see, so you can’t get the money back out until then?

No.  But in fairness you can also have relatives etc pay in...You can also look at a Stocks and Shares Jisa, which if your child is very young and you are looking at the long game, would actually give you more money as short term fluctuations wouldn’t affect you.

Is the tax the same for that?

You mean on the dividends?  Yes you don’t pay tax on them regards the Jisa.  You can also overcome in a way inheritance tax if you get the grandparents to pay in a max of £3k a year, then that wouldn’t be taxable upon the grandparents’ death.

So are you saying that a higher risk Jisa would pay off if my child is very young, seeing that I am invested for 18 years anyway?

I am no financial advisor, but from my experience, yes.