Your questions answered: Junior ISAs & children’s bank accounts

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We're no longer taking questions on this Q&A. Chris has answered some of your questions below!

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With so many options available, it can be difficult to know the best way to start saving for our children's future so we've invited Chris Rudden from Moneyfarm to answer your questions. Whether you’d like to know how to start saving for your child’s future, what type of account is right for your family or how you can inspire your children to save money, post your question on the thread below.

• Everyone who shares a question below by Wednesday 22nd June will be eligible for the prize draw where one lucky Mumsnet user will win a £200 voucher for a store of their choice.
• Chris will be back online in a couple of weeks to answer a selection of your questions on the thread below.

About Chris Rudden, Head of Investment Consultants UK “Chris is passionate about blending technology and human expertise to help people make better investment decisions to secure their financial future. Chris has risen through the ranks at Moneyfarm and is the head of the client-facing department for the UK.”

Here’s what Moneyfarm have to say:
“Finding the right path for your investment journey has been at the core of our strategy since we began a decade ago. And while the markets are constantly changing, there’s a constant – our expert team, equipped with quantitative and qualitative techniques (and some tools) remain committed to helping you make better investment decisions.”

Thanks and good luck with the prize draw!
MNHQ

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We have a 9ish year old stocks and shares Isa for our son who is now 17. What are his options now ? There is absolutely no point keeping the money where it is because it has made zero in the time we've had the policy. I wish we'd moved the money before now but there were few providers accepting children's ISAs ?

Is it better to open just a bog standard bank account when children need to start learning how to manage money/use a debit card - or are these GoHenry type accounts better?

What the hell are the past two replies?

My child is 15 now is it too late to change the child trust fund for a junior Isa. I am not sure what to do for the best outcome for him

Is it possible to move a junior stocks and shares ISA to a different provider?

When do people normally open a JISA for their child? Is it best to just do it as soon as they’re born? Can you open one while you’re pregnant?!

Hi everyone. Thanks for taking the time to post your questions on this thread. I will answer a selection of these today and I hope that my responses are helpful to you!

Chris

Hi @Waspie

Thank you for your question. Particularly if the fees are high, then it is definitely worth thinking about switching. Switching is generally quite simple and takes around 2-3 weeks. If you can then save money for the next 4 years as a result then it is worthwhile. On top of this, the end of the JISA is not the end of the saving life cycle, as the money then moves into an ISA in the name of your child. This is generally done automatically with the same provider, so if the new provider is cheaper, then your child will continue on with that benefit.

Hi @dancingmice

Thank you for your question, it is very relevant. Time is the best friend of any saver. When we look at the power and the effect of compounding the effect is amplified more and more the longer that you can go. So as a result, the sooner that you can start the better as this will allow this compounding to work it's full magic. If you are in the position to be able to put money aside from the point that you child is newborn, then it will give the money the best chance to become a nice nestegg when your child turns 18. But be aware that money put into a JISA cannot be retrieved, so make sure you can put it away first.

Hi @MumC2141

Thank you for your question. With a JISA unfortunately not, once your child turns 18 the money is transferred to an ISA in their name and they are in control. Hypothetically you could ensure that the money is then moved into an ISA that they have with some lock in period, but that is less about you having control and more about placing restrictions on them. That leaves a couple of other options. There are some specific trust funds that keep the money locked until the child is 21 (or could be even more bespoke), however you would need to find a provider who would do this. The alternative is that you save money within your own savings accounts - maybe as a separate pot - whether it be an ISA or general savings and then you can fully control when you choose to gift it to your child.

Hi @nannynick

Thank you for your question. This comes down to 2 key points. Your risk appetite and the time horizon of the saving period. Your risk appetite forms the basis of this decision and then the other factors build from here. If you are not comfortable with market volatility then you should generally stick to lower risk investments or cash regardless of the time frame. However if you are comfortable with the volatility that some investments can bring then this opens up your scope a bit more. You can find various ways to ascertain your risk appetite, if you would like to speak to a Moneyfarm consultant then you can book a call here.

Moving on to time horizon. The general rule of thumb is that, the longer your time horizon, the more risk that you can take on (assuming it is a well diversified portfolio). A longer time horizon allows you to ride out the general ups and downs that markets have - which historically have been more up than down. As a result you can take on a higher equity allocation and that will give you a good chance of strong positive growth over that period, particularly vs cash which would lose money exponentially vs inflation over a long period. However, having said all of this, if the time horizon is only around 2 years or less, then we generally encourage people to put their money into cash. Markets are far less predictable over the short term and the chances of success become closer to a coin toss. On top of this, if markets do fall, you don't have the time horizon to allow them to recover.

In terms of having both, if there are 2 different goals with each pot then it's worth having 2. If there is some amount that you would like to 'guarantee' that your child has when they turn 18 and another amount that you would like to give the chance to grow but accept the volatility on, then this could be a reason to have both.

Hi @RollingInTheDeepSouth

Thank you for your question. There are a few factors that need to brought in for this decision. However, historically, over longer periods of time a well diversified investment portfolio has tended to outperform cash. Particularly in a current situation with interest rates being very low and inflation being quite high, the value of the savings would be eroded over the course of the period it is saved. There are plenty of providers who would invest on your behalf, which could be the best option in your position. Having said that, investing is not without risk and it is vital to understand you attitude to risk and also the time frame for the investment - to determine what is the correct mix of investments. Again, companies are available to do such questionnaires and to help with these decisions. If you would like to book an appointment with a consultant at Moneyfarm, it is completely free and without obligation and could certainly help to give you some clarity.

But to summarise I would certainly say it is worth considering as, particularly if there is still some time before your child is 18, an investment JISA could give you the best chance of beating inflation and growing the money. But it is important to consider the risks and to make sure the investments are appropriate.

Hi @Callisto1

Thank you for your question. Unfortunately not. When the child turns 18, the JISA is then transformed into an ISA in the name of your child and they will have full control. There are some types of trusts that have a different age at which they mature, but they are harder to come by and might have a higher fee structure on them. The alternative is that to save some money in separate pot yourself, then you can stagger the gifting of that money as your child grows up.

Hi @Estraya

Thank you for your question. You can have one cash JISA and one Stocks and Shares Junior ISA per child. 3% AER is a good rate for a cash account, however if you would like to build up beyond the the £2,000 level then it is definitely worth exploring other options to do on top. A Junior ISA doesn't necessarily have a different set rate to a standard account, it is simply that any and all returns are tax free. The interest on a £2,000 account is unlikely to be taxable, as it will be below the threshold, however as money builds it up the tax protection will become more meaningful. On top of this, once your child turns 18 the account becomes an ISA - so your child's money is already tax free and sheltered from whatever growth it get's in it's time in the account. So it could be worth considering some JISA options on top of the savings account that you have got. This can either be cash, stocks and shares or both.

Is there any point in converting a long dormant (but with some funds in) CTF to a JISA?

Hi @fishnships

Thank you for your question. This is a difficult one, ultimately it's hard to say on how Building societies will act, they are more likely to stay open than bank branches, given the nature of their clients, however they are not immune to the cost savings of moving online. Having said this, there are a lot of benefits to handling things online. There are many more visual cues which can we helpful in educating children. You can see the value changing as well and many colourful charts and graphs that can help to explain what is happening. On top of this, many websites/app provide a lot of videos and content that can help to educate. On top of this, generally these providers will have someone on hand that you can talk to as well.

Hi @Marketa85

Thank you for your question. In terms of mainstream products this is difficult. Generally the best solution for this is to set up accounts in your own name - either an ISA or normal savings account - and then you can control the money flow and have more accessibility. Perhaps setting up as a separate pot to your broader savings can help to separate the pots mentally. Then you can control how the money is paid to your child.

Hi @WithOneLook

Thank you for the question, it is a good one. We are in a shifting generation, as you say, and there are less physical triggers that are used. However there are still ways in which you can create the same effects. You can have relatives pay into a JISA for your child (or you yourself) then you can show the value changing from the online account. The benefit here is that often most companies will work hard on creating a quite user friendly interface - which can make the viewing experience more enjoyable. Then, particularly with a stocks and shares JISA, you can show the growth and changes in value. This can help to excite your child more in the benefits of saving and could encourage them to save more.

Hi @burwellmum

Thank you for your question. Regardless of the current scenario, the question about how to save money is simply a question of time horizon. If you have a long time horizon for the JISA - particularly if it is locked away for 7+ years, then it is worth considering a stocks and shares JISA. Markets work in cycles and a long time horizon allows for those cycles to play out and allows you to benefit, hopefully, from the possibility of greater returns. If this is the case then the current market sell off could represent an opportunity, as long term valuations are better now than they have been for some time. However, if the time horizon is very short, less than 2 years for example, then the direction of markets is much less predictable and it generally recommended to have a lower risk. If you are uncertain, you can open one of each for a child as well.

Hi @ladyluck13

Thank you for your question. What you are describing is quite literally a junior ISA. You can have a stocks and shares junior ISA and a cash Junior ISA. You can add money into this 'JISA' along with any relatives and friends etc. Once money is in the JISA then it cannot be accessed until the child is 18 (can sometimes be 16), at which point is becomes a regular ISA for your child. Starting early is great as it allows for compound interest to take full effect and really help to build up the savings over the 17 and a half years. Investing is also a strong option as the the longer the time frame the better chance a well diversified portfolio can have of giving some good returns. With cash savings so low, over this sort of period, there is a strong chance that a low of the value will be eroded by inflation. However investing is not without risks, so it is definitely worth speaking to someone before starting to invest, to make sure the investments made are in line with correct risk appetite, time frame and also to make sure the investments are properly constructed.

Hi @mindtheGAAP

Thank you for your question. There are many providers who actually will invest on your behalf. I'll cite Moneyfarm as as example, but there are others, we assess each client's risk appetite and timeframe (among many other factors) in order to determine the correct level of risk. The team of experts invest the money on behalf of our clients. This can either be set up through the our website/app or with a human. In this new age of digital investing these services are much cheaper than the traditional financial advice and you can often chat to someone for free. This can be done with many places not just Moneyfarm, but if you would like to just have a chat with someone please feel free to book a free apointment with us here.
But the main point really is that is isn't expensive nowadays to find a solution where experts invest on your behalf, so that you don't have to worry about missing out.

Hi @EnglishPearFreesia

Thank you for your question. I think it is always worth having a look to see if you can find something better. Whilst the JISA itself only has a year left, it is by no means the end of the lifecycle of the savings. Once your son turns 18 the account will turn into an ISA and hopefully he will carry on saving into it. However time horizon is incredibly important in investing, so if your son is looking to use the money fairly soon, then it may be worth lowering the risk of the account - depending on the time horizon.

Hi @Mabiscuit

Thank you for your question, Yes absolutely, you can only have one stocks and shares JISA per child, so the only option when you are not happy, is to transfer it. This is often very simple. As an example, with Moneyfarm you simply need to fill out a form and then we would do the rest to complete the transfer. It will be similar everywhere. The process generally takes around 2-3 weeks to complete. The only thing to be conscious of is that it can be detrimental to transfer too often as with a stocks and shares JISA you can end up being out of the market a lot and missing out on potential returns.