I could buy all the Hero Factory there is! – JD, 5
When JD was born back in 2007, the decision to set up a trust fund for him wasn’t a difficult one. We were incentivised – as all parents were back then – with a £250 starting voucher. We set up an account, paid the voucher in and topped it up sporadically with small contributions.
But then, the effects of the credit crunch set in, the economy took a nose dive and the Government withdrew the child trust fund incentive. Such a shame, really. Not just for Miss J, born in 2011, but for all children born after the voucher system was withdrawn in 2010. That voucher, though only a small amount in the scheme of things, seemed such an effective way to get parents thinking about saving for the future and to help ensure that young adults had a fund to turn to when they reached working/university age.
Bye, bye Child Trust Funds
Ah well, the vouchers have gone and Child Trust Funds are no longer open to new applications, but savings accounts designed to be opened in children’s names and left to mature throughout their childhood remain, and in my opinion they’re still well worth it.
The junior ISA
A junior ISA isn’t a Child Trust Fund, it’s more like a regular ISA. Just like an adult ISA, there is no capital gains tax or tax to pay on investment income, and you can top up with up to £3,720 in each tax year. The parent or legal guardian who applies for the Junior ISA will be named as the ‘registered contact’, responsible for managing the child’s ISA and making any investment decisions, but the child will be the only person who can withdraw money once they turn 18.
If your child was born between September 2002 and December 2010, they’re current in a bit of a grey area. If you have a Child Trust fund for them, you can’t move it yet. And if you don’t have a CTF, you can’t yet open a Junior ISA for them, but later this year, hopefully in about 8 weeks, Junior ISAs will be open to all children, so you’ll be able to move their CTF, or open a new Junior ISA for them if they don’t already have one.
AJ Bell sent us details of their Sippdeal Junior ISA and I’m so glad they did. It gave me the nudge I needed to start saving for Miss J (19 months) and I’m cross with myself for not getting to it sooner. And that’s the thing, isn’t it? Without that Government nudge, it’s all too easy to forget the importance of savings.
The Sippdeal Junior ISA
The Sippdeal Junior ISA is a bit different to the cash ISAs you might be familiar with, which, in my experience are fairly light touch. With a Cash ISA, you pay an amount in and get interest over time, but with a Stocks and Shares ISA, like the Sippdeal Junior ISA, you have more control, which means you can choose where to invest your money and how much risk you wish to take in pursuit of higher returns. Personally, I find that kind of financial dabbling quite scary and mega-confusing, but I’m open to anything, so I set up our account and off we went.
With the Sippdeal Junior ISA, you make a commitment to contribute at least £25 a month, and there are a range of investments you can then choose to make without charge. If, in a given month, you want to invest more, there’s a fee of £1.50 per investment, or £9.95 if you decide to sell. Each year, you also get a 0.5% ‘cash bonus’ against your investment, so there’s potential for a decent return, although as with all investments, there’s a risk that your overall savings value could go down as well as up.
Make sense? Let me know if you try it.
Disclosure: this a sponsored post. Thoughts expressed are my own.