Saving for your children should be an option for everyone. Whether or not you claim benefits, you have a right to open a junior ISA (JISA) and give your children a head start.
Means-tested benefits, like Universal Credit, look at how much money you have saved up so some people worry about opening a new savings account even if it’s for their children.
However, families can access the advantages of JISAs for long-term savings without missing out on their benefits.
What is a junior ISA?
JISA are savings accounts for children. Any child up to the age of 16 that doesn’t have a child trust fund can have a JISA, but it needs to be opened by their parents or legal guardians.
You can have a cash JISA or a stocks and shares JISA. Stocks and shares JISAs invest your money in the stock market, so they have good potential to grow over the long term, but there's still a chance your child might get back less money than has been put in. With cash JISAs your money is protected, since it isn't invested in the stock market. They grow by earning interest like current accounts do, but your money may lose some of its value as inflation goes up.
Anyone can pay into a JISA, but the money can only be taken out by the child and only when they turn 18.
Do junior ISAs affect benefits?
No. Some benefits, such as Housing Benefit and Council Tax Support, are means-tested. This means your ability to claim these benefits depends on how much money you earn and how much you have saved.
JISAs, however, are in your child’s name, so they don’t affect your rights to any benefits. As a parent, you can’t touch the money yourself so it’s not counted as your own savings.
Because of this, a JISA can be a great way to start saving for your child’s future without you needing to worry about your ability to claim means-tested benefits.
Do junior ISAs count as savings for Universal Credit?
Universal Credit (UC) has a maximum savings limit of £16,000, but as you can’t touch the money in a junior ISA, it won’t count towards that savings limit.
If your child has more than £6,000 saved when they reach 18, it will affect their own Universal Credit claim.
One thing to keep in mind is that you can’t choose to move money into a child’s savings account so that you can claim Universal Credit. That’s called “deprivation of capital” and will count against you in means-testing for UC benefits.
Can you claim Universal Credit if you have a junior ISA?
If your parents opened a JISA for you, you’ll be able to choose what you want to do with the money when you turn 18. You’ll be able to either withdraw it, save it in another account or let it automatically move into an Adult ISA.
You’ll also be able to apply for Universal Credit at 18, but your JISA savings may affect whether or not you're eligible. This depends on how much you have in your JISA:
You can claim Universal Credit if you have £6,000 or less in savings
When you apply for Universal Credit, the first £6,000 of your savings won't affect whether you can claim Universal Credit. So, if you have £6,000 or less, it will make no difference to your claim.
If you have between £6,000 and £16,000 in savings, it will affect your Universal Credit claim
If you have between £6,000 and £16,000 saved, this will count towards your income and will affect how much you can get from Universal Credit, but you can still claim.
If you have more than £16,000 saved, you can't claim Universal Credit
If you have more than £16,000 saved then you won't be able to claim Universal Credit at all.
Should I open a junior ISA?
There are plenty of reasons to open a JISA and everyone has a right to save for their child, no matter their circ*mstances. Because the amount you hold in a junior ISA doesn’t affect how much you can claim in benefits as a parent, it can be a great way to give your child a leg up in life.
JISAs also don’t require you to keep up with any regular payments. You pay into it however much you want, whenever you want, up to £9,000 a year. This means that if your income changes, but you still want to save up for your child, you can just put away some money into their JISA whenever it feels comfortable for you. It’s also a really good option for other family members or friends to help out since anyone can pay into a JISA.
When your child turns 18, they’ll be able to decide what to do with their JISA savings, so it’s a good way to start talking to them about money management and the importance of saving.
Stocks and shares JISAs have good long-term growth potential, but the value of your investments can go up or down and your child could get back less money than you’ve put in.
