HMRC data shows that getting into the habit of consistently saving into your child’s JISA can seriously pay off, particularly if you get started early. 

In the 2021/22 tax year, 370 young savers had amassed fortunes over £200,000 solely through their Junior ISAs. Even more impressive is that the top 50 child investors for the tax year had accumulated average savings of £761,100, representing a windfall that’s likely to turn them into millionaires by the time they reach their 20s if they choose to continue investing. 

Given that reaching a Junior ISA balance of £761,100 would require an average annual return of just under 32%, we can assume that parents decided to open a Stocks and Shares JISA, rather than its fixed-rate cash alternative. 

Junior ISAs come with a tax-free annual allowance of £9,000 each tax year, and account holders have no obligation to pay income tax or capital gains tax on their earnings, meaning that their entire pot is available at 18 without any money falling into the hands of the taxman. 

But for most of us, putting money away for our children’s future can be a stressful experience, particularly when Junior ISA savings can’t be accessed until our kids turn 18. So, how can you invest in a JISA without losing sleep? Let’s take a look at some essential tips to build a nest egg for your loved ones without breaking the bank: 

Investing Leads the Way

While investing can carry more risk than saving in a fixed-rate Cash JISA, opening a Stocks and Shares JISA has been a historically far more reliable means of building a substantial amount of money for your child’s future. 

Over the past 10 years, the average return on Stocks and Shares ISAs has been 9.64% per year, while their lower-risk cash counterparts have mustered just 1.21%. 

Because Stocks and Shares JISAs are invested in assets, your funds can grow as your chosen investments appreciate in value, helping to support far greater returns in a bull market. 

Given that many global stocks have been rallying amid the ongoing artificial intelligence boom on Wall Street in recent years, it’s been a lucrative time for investors to open a Stocks and Shares ISA, and this also applies to parents opening accounts for their children. 

However, it’s also important to remember that investments are also capable of going down as well as up, and there’s no guarantee that a Stocks and Shares JISA will outperform a Cash JISA over the next 18 years. 

Get Started Early for Compounding

If you’re looking to get the most out of your Junior ISA, you should be ready to make compounded interest your best friend. 

Because Junior ISAs have a £9,000 annual tax-free allowance, savvy parents look to compounded interest as a means of making their savings or investments stretch further. 

Due to of the effect of compounding, £1,000 saved into a JISA when your child is born is far more valuable than £1,000 saved when they’re 15 years old, for instance. 

In fact, just a deposit of £1,000 in a JISA with an assumed 3.6% annual interest rate would be worth £1,909.80 by the time they turn 18. Whereas in a Wealthify Junior Stocks and Shares ISA, that figure is projected to be £2,507 (£1,553 if markets perform worse than expected or £4,177 if they perform better than expected).

It’s for this reason that getting started early can really make your money stretch further if you’re looking for the most efficient way of building a nest egg when saving or investing for your kids as they grow up. 

Get Friends and Family Involved

One of the best perks of a Junior ISA is that anyone can save on behalf of your child if the JISA provider facilitates it. This means that if you want to give your loved ones the best start in life but are concerned about your ability to save, you can open the door to others who can help you out. 

This makes JISA investing a functional alternative when thinking about birthdays and the holiday season for your kids, with grandparents and friends all able to make a contribution to their account. 

The flexibility of Junior ISAs can also help to overcome the challenges of Inheritance Tax by allowing yourself or the child’s grandparents to pass down their wealth earlier, helping to avoid incurring a higher rate of tax payable on the money transferred over. 

JISA Saving with Peace of Mind

There are many ways to build a nest egg for your child’s future, but few approaches are as tax-efficient as a Junior ISA. Whether you’re a saver or investor, JISAs provide your child with the best possible start to adulthood by securing a windfall for when they turn 18. 

Because JISAs can be contributed to at any stage of childhood and by anyone, it serves as an investment strategy that can adapt to your own individual financial circumstances and goals. As a result, you can provide your kids with a healthy amount of money to take their first steps into adulthood, and in a way that doesn’t have to cause you undue stress.