Junior ISA (JISA)
Junior ISAs are specially designed for children under the age of 18. A parent or guardian must open a JISA in the child’s name, and from there other relatives can make contributions. You can choose to have either a cash JISA or stocks & shares JISA. Currently the limit for a JISA is £9,000 per year.
This is for each child, so if you’ve got three children and you open three JISA’s in each of their names, you’ve got a total of £27,000 to split between the three £9,000 allowances. Here’s the slight catch – any money saved cannot be withdrawn until the child turns 18. At this point, the money will move automatically into their name and their control, which means if you don’t want your child to potentially do something you wouldn’t approve of with the cash, the JISA might not be the best option.
5 reasons why it’s not too late to start your ISA
1. Take advantage of the annual ISA allowance
It’s a use it or lose it situation! Whilst it’s never too late, you can’t get back previous years of ISA allowances. If you don’t put £20,000 into ISAs this year, then you’ve essentially missed out on the opportunity to have that money saved in a tax free environment. You will have your £20,000 again next year (happy days) but you won’t be able to get back previous years.
2. Rates increase in ISA season
Often between March and April, right before the new tax year and the ISA reset date on the 6th April, the interest rates in cash ISAs creep up, as the providers want to incentivise savers to put the money in the ISA. If you’re getting close to this period, you might also be able to benefit from higher interest rates.
3. Take advantage of compounding
There’s a well known phrase when it comes to investing: the best time to start was yesterday, the second best time was today. The reason for this is because the sooner that your money can start growing, the sooner you can start taking advantage of compounding. In a nutshell, the more money that there is to grow, the more it will grow.
4. Tax benefits all year round
One of the great things about ISAs is that the tax benefits don’t go away, they’re there all the time! Any growth that you see and any withdrawals that you make (whilst a UK taxpayer) won’t be taxed. It’s never too late to take advantage of these tax benefits, so get enjoying them all year round.
5. Dollar cost averaging
Last but not least, you can include contributing to your ISA as part of your dollar cost averaging strategy. AKA, take advantage of regularly saving and riding out the highs and the lows of the markets.
The bottom line
ISAs are a magical tax beneficial scheme that we have in the UK, making saving and investing simpler and more effective than if you go without. Whilst it’s never too late and there’s no bad time, there’s no better time than the present. The sooner that you start, the more your future self will thank you.
