Putting money away every month is something many UK households will do to give themselves a decent savings pot for the future or for a rainy day.
And for households with children, there is that extra worry about the financial security of little ones for when they grow up.
Previously, many parts may have opted to open a Child Trust Fund savings scheme, which the government contributed money to and the funds became available to children once they turned 18. This scheme ended in 2011 and since then the onus has been on parents – and grandparents – to help organise savings for their children’s future.
While putting money in a savings account is a popular option, financial services firm Fidelity International recommends opening a Junior ISA and committing to regular payments every month.
According to the firm, if households put away £55 into a Junior ISA every month, this could grow into £18,024 by the time the child reaches their 18th birthday.
Becks Nunn, of Fidelity International, explains: “Let’s say you could afford to put away £55.50 a month in a Junior ISA (which isn’t much more than a cinema trip for two, including snacks).
“That still has the potential to turn into £18,024 by the time the child turns 18 – assuming a modest annual growth rate of 5% (which isn’t guaranteed). That’s a pretty healthy nest egg by any standards.”
Of course, households that can afford to pay more into an ISA each month have the potential to accrue much more than £18,024 if they max out the savings allowance.
In the 2024 to 2025 tax year, the savings limit for a Junior ISA is £9,000 per year. Anyone can pay money into the account, but the total amount cannot exceed this threshold within the tax year.
That means the maximum amount you could pay in each month, over a 12-month period, would be £750. And if you commit to this amount every month until your child turns 18, this could turn into £243,561.40, based on a 5% annual growth rate.
Nunn adds: “If you are prepared to take investment risk, then there could be a more powerful way to secure longer-term financial goals.
“If you can invest the full Junior ISA allowance (which currently stands at £9,000 per year, or £750 each month), based on 5% annual growth it has the potential to turn into a whopping £243,561.40 once they turn 18 (it could fall in value too). That’s some birthday present.”
