Junior investing can be one of the most beneficial things to consider for your finances, to build your own and your family’s wealth effectively for the future.
As such, we thought it right to give you a comprehensive guide on junior investing, so you can explore for yourself, how you can invest in your little one’s future.
Read on to learn how junior investing works and what benefits it can provide for your finances.
If you require any further assistance, you can always speak to a wealth management firm.
How does junior investing work?
Junior investing involves you opening specific investment accounts designed to grow your child’s finances. These accounts are often designed to encourage tax efficiency and help you build your child’s wealth for the future.
There are two junior investment accounts that might benefit you to know – Junior Individual Savings Accounts (JISAs) and Junior General Investment Accounts (Junior GIAs).
JISA investments allow you to grow your child’s savings with tax-free contributions each year, either in a cash JISA or stocks and shares JISA. The amount you can contribute each year is according to the annual JISA allowance – which as of the current tax year 2023/2024, is £9,000.
The savings in this account cannot be accessed until your child turns 18, but anyone can contribute to it each tax year, whether that be yourself, grandparents or any other family member.
Junior GIA investments allow you to build your child’s wealth with potentially successful returns from several securities. Unlike JISAs, you can withdraw from this account at any time, but the returns are not exempt from income and Capital Gains Tax (CGT).
What benefits can junior investing provide for your finances?
When investing in junior accounts, you can gain a wide range of advantages for your finances, which can include things like:
- Tax-efficient growth for your goals
One of the main benefits of junior investing is that you can grow your child’s wealth tax efficiently towards their financial goals.
There are many future ambitions you might have for your child, whether this be to have sufficient funds to go towards their education, or maybe to put towards purchasing their first home.
In order to achieve these targets, it’s important to have as much money to withdraw and put towards these goals as possible.
By investing each year in something like a JISA, for example, you can end up amounting a large sum of tax-free money for your child to access when they need it.
- Smooth account management
Junior investing can also be beneficial when you choose the right account provider, as this can offer smooth management for all your investments.
Your wealth manager, for example, can help you transfer your existing JISA to your new provider. All you have to do is speak to your new provider, and they can take care of contacting your old provider and transferring your JISA over.
Once you have your JISA, you can also have accurate ways of monitoring and adjusting your wealth with advanced tools.
For example, you’ll be able to access all your junior accounts in one place and have full visibility over the performance of every investment.
- Security and wealth resilience for your family
Investing in junior accounts can also help you build security and wealth resilience for your family.
There are various things which could impact your child’s wealth in the future – such as changes in the economy (financial markets and tax rates), as well as changes in their lifestyle (career and number of financial dependents).
By growing savings in these accounts, you can help provide a financial safety net for your child, as well as give them the means to navigate these potential impacts more effectively.
On top of that, building their wealth from early on can help grow their financial confidence – as well as your own – for the future.
Will you be putting this comprehensive guide into action for your own junior investments? For the best chance of a successful financial outcome, it’s worth speaking to your modern wealth manager when planning your investments.
Please note, the value of your investments can go down as well as up.