A little while ago I ran a competition, where I asked you what topics you’d like to see covered on the blog. Funnily enough, (anyone would think we were in a recession or that it was budget weekend or something), lots of you said you’d like to read about money. Or, more specifically, how to save it.
To prove that I take you all terribly seriously, I decided to have a bit of a finance themed weekend. I spoke to Scottish Friendly, who specialise in child and family investments, to find out how you can make the most of your money with a Junior Individual Savings Account, junior ISA or ‘JISA’.
The JISA, which replaced the Child Trust Fund when it was discontinued in November last year, is basically a tax effective way to save or invest for your kids, whether you’re looking just to put aside a little something, or wanting to save or invest towards something specific, like university.*
If you are thinking about getting a JISA on behalf of your child, you’ll need to know exactly how it works if you want to get the very best value for money, so here’s a run down of the basics:
- Savings or investment: The JISA is available in two types: ‘Cash’ or ‘Stocks and Shares’. A Cash JISA works like a regular savings account: money put in is secure and generates interest. A ‘Stocks and Shares’ JISA is an investment account – money contributed is invested in the stock market. Bear in mind, like any investment product, the value of shares can rise and fall on a daily basis and your original investment is not guaranteed. It’s a bit more exciting though isn’t it? You can wear red braces and read the FT and make thoughtful noises, like you know what it all means. A child may hold both a Cash and Stocks and Shares JISA at the same time, up to the current annual limit of £3,600.
- Tax protection: This is the best bit. Returns generated by interest or investment in both the Cash and Stocks and Shares JISAs are exempt from income and capital gains. Tax treatment depends on individual circumstances and tax law may change in the future.
- Contributions: Once the JISA is set up by a parent or guardian, anyone may deposit money in a child’s JISA, so rather than overwhelming small children with birthday and Christmas gifts, why not get all those generous spinster aunts and Godparents to pop some money in their JISA instead? Compound interest – the gift that keeps on giving…
*Haha! You’ll never be able to save up that much surely??
Tomorrow I’m continuing the theme, and talking low-cost holidays for families. Then on Monday I’ll go back to being less dull.