Building up a savings pot for your child can help ensure they have funds to fall back on when they reach adulthood as well as help them establish good money habits from an early age.
One way to help your child build up a nest egg is to open a junior ISA (JISA). It’s possible to put money in either a cash junior ISA, a stocks and shares junior ISA or both. In this guide, we’re looking at cash junior ISAs.
Compare cash junior ISA accounts
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Junior ISAs were introduced in 2011 as a replacement for Child Trust Funds (CTFs). Parents and guardians can open a junior ISA for their child as long as the child is under the age of 18 and a UK resident. Anyone can then pay into the ISA, including family members and friends.
However, like standard adult cash ISAs, you’ll only be able to pay in a set amount each tax year. For the 2024/25 tax year, the junior ISA allowance is £9,000. If you don’t use this allowance, you can’t carry it over into the following year.
Only one junior cash ISA can be held per child and the money cannot be accessed until the child turns 18 – apart from exceptional circumstances. As soon as you’ve paid money into the junior ISA, it belongs to the child. Children can start managing their own accounts from the age of 16 and once they turn 18, their ISA will automatically become an adult ISA. Importantly, no tax is payable on any of the interest earned.
Note that if your child was born between 2002 and 2011, they might still have a CTF, in which case it can be transferred into a junior ISA.
How to compare junior ISAs
When comparing junior ISAs, you’ll want to look for one that pays a competitive rate of interest. However, it’s also important to keep the following points in mind:
What is the minimum deposit requirement? Some junior ISAs can be opened with as little as £1 but some might ask for considerably more.
How can the junior ISA be managed? Some might be operated in branch only, while others can be managed by post, over the phone and/or online.
Are there any penalties for transferring your junior ISA? Your child can only have one cash junior ISA but you can transfer it to another provider to get a better rate. Just make sure you do not need to have held the junior ISA for a certain length of time before penalty-free transfers are permitted.
Are junior ISAs a good investment?
Yes, junior ISAs can be a great investment for your child’s future. However, it’s important to remember that your child cannot access their funds until they turn 18, so junior ISAs won’t be suitable if you want your child to get hold of their cash earlier than this.
Junior ISAs can also be a good option if you’re worried about tax as no tax is payable on any of the interest earned. Like adults, children have a personal tax-free allowance, which is the amount of income they can earn before paying tax. This currently stands at £12,570 for the 2024/25 tax year. On top of this, there are additional tax-free allowances for any income from savings interest, which means they can earn up to £18,570 tax-free.
However, if any money gifted by a parent earns more than £100 in interest in a standard savings account, the full amount of interest (not just the £100) will be taxed as if it were the adult’s and not the child’s. A junior ISA would be beneficial in this case as the interest earned would still be tax-free.
Pros and cons of junior ISAs
Pros
No tax payable on interest earned
Save up to £9,000 each tax year
Anyone can pay into a junior ISA for a child
Useful way to save money for your child’s future
Cons
Money can’t be accessed until your child turns 18
You can’t control what your child decides to do with their money
You can only have one cash ISA per child
Junior cash ISA rates aren’t always competitive
Bottom line
As long as you’re happy to lock away money for your child until they reach the age of 18, a junior cash ISA can be a great way to invest for your child’s future. However, remember that the money is theirs, so as soon as they are old enough to access it, it’s up to them how they spend it. What’s more, junior cash ISA rates aren’t always the most competitive and if you’re investing for the long term, you could be better off looking at a stocks and shares junior ISA instead.
Frequently asked questions
Yes, as long as the bank or building society you're considering is authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA), it must protect customer deposits under the Financial Services Compensation Scheme (FSCS).
This means that up to £85,000 per person, per banking institution, will be covered in the event the bank went bust.
If you go over the £9,000 annual junior ISA limit, the additional funds will be held in a savings account in trust for the child. The money won't be returned to the original donor.
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Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio
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