DOES your child spend too much time playing his Xbox, or texting on her phone?
It doesn’t have to be that way. There is a great alternative to handing them the new Xbox or latest phone for Christmas or their next birthday. It is an alternative that involves putting money away for them, and the good news is that they cannot touch it until they turn 18.
The Junior Individual Savings Account or Jisa was introduced in November 2011 specifically to enable parents to save for their children. When your child turns 18, the Jisa automatically turns into an Isa.
The Jisa was an immediate hit, with 296,000 being opened in its first tax year. It continued to be a hit, and by 2019 there were 954,000 Jisas, of which two thirds were cash accounts. Like its big sister the Isa, the Jisa also comes in a stocks and shares version.
If your child is very young, or even a wee baby, the stocks and shares Jisa, which invests in the stock market, could be worth considering. Over 15 years or longer, stock market investments usually outperform cash, often by a long way.
It can be hard to start saving into a Jisa for your child when you are locked into the most expensive years of your life, with a new mortgage and the cost of furnishing a new house. But you have to take the long-term view. It will give your child a great head start in life. And you don’t have to go it alone.
It’s not just parents who can save into your child’s Jisa. Aunts, uncles, grandmothers, grandfathers, next door neighbours, people down the street, even local politicians can all pop in a few bob, as an alternative to handing our wains cash that they would only spend foolish anyway.
Most financial institutions will not accept the latest pair of Nike trainers (size two, worn out) as part of a down payment on a house. They will, however, consider the contents of a Junior Isa, now become an Isa. It doesn’t have to cost a fortune, either. Just £20 or £25 a month can make a lot of difference.
And, of course, because a Jisa is designed to protect your money from the taxman, there are no worries about tax.
More to the point, you’d be amazed the effect a Jisa will have on your child’s money sense. You can talk to them about it over the years, so that they are aware of it, and it can make them financial savvy.
One of the major Jisa providers, the financial advisers Hargreaves Lansdown in Bristol, said that 94 per cent of their clients still have money in their account a year after turning 18.
So it doesn’t just get taken out and squandered.
It is treated as it should be: a cracking little nest egg that can get them their first house or, if they lose the plot completely, buy that engagement ring.
I think most of us have lost the plot on both counts, over the years.
:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice or at www.mkennedyfinancial.com
