Junior ISAs for AC - concerns around accessing the money at 18?

[FoldedAndUnfoldedAndUnfolding]

It's a bit of a random question from me this time! Just curious as to whether other people have set up savings accounts or junior ISAs for their AC? The advantage of ISAs is of course that they are tax free, but the downside is that the child automatically has access to the money from 18. So if you've built up a substantial amount of money in the ISA over the years, and if your AC is in an emotionally difficult place at 18, they will suddenly have a windfall of cash which I worry could lead to short-sighted decisions.

My decision is slightly complicated by the fact that I already have a junior ISA for my BC. It was a very carefully considered decision at the time, but given we have a very stable family and our various teenage cousins all seem level-headed and sensible, we decided to risk it. I worry if the additional challenges faced by an AC when they are going through teenage identity issues might tip the risk assessment the other way?

What have experienced adopters done?

We have treated it as a "need to know" and so we won't be telling our DS that he has an ISA any time soon!
I expect the provider will write to DS when 18....maybe we'll intercept the letter (probably illegal) if the time isn't right ...

Sounds like a good workaround!

We’re avoiding anything that means lump sum at 18. There’s a law firm advertises in the adoption uk mag that specialises in wills for ac for same reason.

Can I ask what made you decide you need to avoid lump sums at 18?

Oh, a million reasons...

I don’t think a lump sum at 18 is particularly healthy or helpful for most 18 yos. I hate to think what I’d have done with a significant sum at that age but it wouldn’t have been anything good.

I’m not planning on stopping parenting them when they turn 18 so I’m allowing some room for us to still be involved with big financial decisions.

It's my intention to continue contributing to the ISA, and for my DC not to touch the money, until they're at least 21. The problem will be if they are "out of control" at 18 and insist on withdrawing the money straight away - legally I'd have no way of stopping them.

I think Alljam's solution of simply not telling them until the right time seems pretty nifty. I don't want to incur 20yrs of tax just in case my AC isn't mature enough at 18 to accept my instruction for them to wait until 21.

I can totally understand fatberg's reluctance to even set up an ISA though. If only I had a crystal ball...!

For the record, I would absolutely have listened to my parents at 18 if they told me not to spend the money. Even if they'd let me spend it I would have hung onto it until I was ready to put down a house deposit with it. My AC will have had a very different start in life though, and adolescence is hard enough without considerations of potentially meeting your birth family. So it just feels like a very volatile moment to introduce a windfall.

I have an ISA in my name for DD. It doesn't get as much interest as a junior ISA would but it removes the worries you've described. It also means we could access the money earlier if needed eg if she were to get really good at a sport/hobby and needed money for equipment/trips. She has one of these savings things the government ran for a few years that is in her name, won't have more than a few hundred pounds in it though, not too bothered if she fritters her way through that at 18!

To be honest I would have the same concerns for any 18 year old, whether adopted or not. I have a junior isa for AD. It has crossed my mind but I will also not worry about telling her that she has one. I’m not going to spend the next 16 years worrying about what she might do with 15k at 18. We are saving it so she can buy her first car or put down a house deposit. If she blows it then she doesn’t get either, life lesson learnt. 15k isn’t a life changing amount of money though I guess, I was never given that sum! So although it is worth considering I wouldn’t worry too much unless you are planning on saving a really substantial sum of money.

Word of warning...I was a pretty typical teenager with no ‘out of control’ behaviour and wasn’t an adopted child. I blew the contents of a savings account that was supposed to be for driving lessons and a car when I happened to come across the cash card in my dads desk as a teenager. My mum had explained the account was the one with the best interest rate and that I wasn’t allowed access to the cash card so it was being hidden away. She made very clear that it wasn’t to be touched. In fact she still doesn’t know to this day. Pretended I was saving it for university. 😬 I didn’t get to learn to drive until I was 27 and felt tremendous guilt fibbing to my mum whenever she asked whether I was going to book any driving lessons so there was definitely a life lesson learned there! God knows what I’d have done with the contents of an ISA!

I’m just at the very beginning of the adoption process...more food for thought for the future I guess and I hope my future children are more sensible than I was! (Or that I’m less naive than my very trusting mum!)

I thought children didn't pay tax on savings anyway, so they won't lose out by having a children's saving account instead of a junior ISA? That's what I chose for our DC - basic children's savings account linked to my main account, that I choose when to tell them about!

If I've understood correctly, for a normal children's savings account you (as the parent) pay tax on any interest in excess of £100 per year. After you've maxed out the Junior ISA allowance for a couple of years in a row you quickly hit that limit. My 5yo BC's junior ISA is already earning more than that per year, and the amount will only go up.

Still not sure what to do, but I appreciate all the perspectives. There's a lot to think about! Thanks to everyone who has responded.

We have very actively not put stuff in our DD's names. DD2 came with a child trust fund which we have not added to.
DD1 is now 18.
We are very thankful she doesn't have access to a lump sum.

She was fine until she turned 16 (sensible, trustworthy, hardworking) and went to college.
She found a boyfriend.
Within a year she was 'engaged' (and actively contacting wedding venues) and talking about wanting a baby, 'forgetting' to take the pill.
She had a years worth of counselling.
At the end of college when she turned 18 she was talking about wanting to move out of home and in with boyfriend more or less immediately.

Now 6 months into an apprenticeship she is emotionally more stable, babies are off the cards for now, she understand how tiring work is, she is learning to budget, and she is grumpy with boyfriend for being jobless and lazy.

I honestly think that if she had had access to say 5k-10k over this period things could have been very different. She would have thought it was enough to move out with / get married, even though the money wouldn't have lasted long, it might have been enough for her to end up pregnant/married.

A good chunk of what has been going on is related to her background in our opinion.

I would advise anyone, but especially adoptive parents, not to put money where their child automatically gets access at 18. Save it for them and give it to them when needed. The interest lost is nothing compared with potentially throwing a teen off the rails.

Glad things are settling Sanders - thank you for posting that, it's food for thought, and not a big reach of the imagination to see that happening. I am not going to be hitting the limits of incurring interest (unless radical change of circs!) but even if I were, I think I'd stick with keeping DD's savings in an a/c only I control.

Hmm think I might let the account get to 2k then set up a new one in my name then. I think I only set up her isa because the council paid her £250 and I probably misread that it had to go into an isa in her name.

Love You probably didn't misread, as that is where DD2's CTF came from, and those had to be in the child's name.

Thanks for all the additional viewpoints. I certainly have a lot to mull over.

Part of me is tempted to just make the address on the ISA my parents' address to make sure the account stays secret until my AC is emotionally ready for it! When you're talking about saving a substantial amount of money over an extended period, the tax difference really does equal thousands...!

It's tricky because some of your comments are exactly what I'm afraid of for my AC at 18, but on the other hand it sounds as though most posters wouldn't have chosen an ISA even for a hypothetical BC? Which is obviously a very different risk threshold to my own, seeing as I'm generally in favour of them and it's only specific adoption-related risks that would make me choose to reduce the savings with annual tax payments. I also struggle to imagine how I would justify giving my AC a savings pot which is significantly smaller than her DSis's account.

Nothing is ever straightforward, sigh! I appreciate all viewpoints shared though.

folded, also take into account how LO is developmentally. The gap between mine and peer group is opening, not closing, which also gave us pause.

I inherited about £6k when I was 18 and blew it in a year with not a lot to show for it. I was a fairly sensible teenager with a job and to be fair, I was at uni so I guess it paid for my lifestyle. But with hindsight, I wish I had been given it when I was older. I regret spending that money. I'm not sure there are many teenagers (adopted or not) however sensible that could risk the temptation of spending a lump sum.