Every parent wants to give their children the best start in life. At Acumen, we believe that investing in your children’s future is one of the best ways to set them up in life. In this blog, we outline just some of the saving and investment options available to you, ranging from children’s investments funds to setting up a Junior Individual Savings Account.
Talking to a financial adviser, such as one of the team at Acumen, can help you to understand the many investments available to protect your children. Here are just some of the options you could take for investing in your children’s future.
Junior Individual Savings Account (JISA)
A JISA protects funds for your children from income tax, up to an annual amount of £4,128. As a parent, you can open a JISA for a child under the age of 16 and invest either cash and/or a variety of stock market-based investments. The criteria for setting up a JISA is straightforward. Essentially, your child must be under 18, live in the UK and not have a Child Trust Fund (CTF) in their name.
Money in the JISA account belongs to your child. However, they can’t withdraw it until they reach the age of 18, apart from in exceptional circumstances. They can, however, start managing their account on their own from the age of 16.
There are several other ISA options for your children as they get older, including:
- Investing in a full cash ISA – Taking the maximum allowance up to £20,000.
- Help to Buy ISA – This government programme helps young people to save towards their first house. For every £200 put into the account, the government provides a 25% tax-free bonus.
- Turn your Help to Buy ISA into a LISA (Lifetime ISA) – An ISA for 18-39 year olds with higher investments that are topped up by government bonuses.
Children’s investment funds
When it comes to children’s investment funds, there are a few possible options available:
Collective funds – such as unit trusts, investment trusts or OEICs – are an excellent choice if you’ve already been saving and investing for your children in a JISA but have reached your annual limit.
Life assurance investment bonds
This type of bond is preferable for larger investments. However, we recommend talking to an Acumen Independent Financial Adviser (IFA) before investing due to the complicated tax rules involved.
Using a trust allows a group of people to pool assets and investments in one place for a beneficiary, which could be your child. The two main types of trust are:
Bare trusts – Also known as simple trusts or absolute trusts, bare trusts give your child access to the income in the trust immediately. Your child is entitled to full control of the trust when they reach the age of 18.
Discretionary trusts – Used more for the future needs of your child, or for children who aren’t responsible enough to have full access to the funds, discretionary trusts don’t necessarily need to be handed over to the child when they turn 18.
Speak to Acumen today
We understand that the many options for investing in your children’s future can be overwhelming. Therefore, we recommend talking to us about the best way for you to begin saving and investing for your children. Our experts at Acumen can take you through the tax rules for each type of investment, as well as explaining how each of them works and help you to plan.
Clever investing creates opportunities and savings for your children when they reach an age where they need it most. For more information on our investment services, call Acumen today on 0151 520 4353 or email us at [email protected].