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Hurry! Deadline for kids’ #saving is approaching fast

mum kid piggyIt’s time to pass the hat around relatives and godparents to top up (or start) a Junior Isa for your kids as the end of the tax year looms.

This year you can put away up to £4,128 in a Junior Isa or Jisa. This is a saving scheme which shelters the returns on the cash from tax. But you must do it by 5 April this year or lose the allowance.

Even the most dedicated fund-raisers might find it hard to collect four grand. But you don’t need the full amount to open a Jisa, you can put in what you can afford. And over time it should grow. The proceeds could go to help with university fees, a car or even world travel when the child reaches 18.

One of the beauties of saving for kids is that there’s a long-time horizon. For this reason, it’s often recommended that the adults invest the money in a shares Jisa rather than a cash Jisa because the returns tend to be better. There is also more chance that a stock market crash will recover over a long period of time so the risk of losing your money is less.

We’ve recently had a bit of a nose-dive in share prices. This has frightened some investors while encouraging others to buy into cheaper prices. If you’re of a nervous disposition, you could just put the money into a cash Jisa by the deadline to make sure you get your allowance. You could then switch it into shares at a later date, if you want.

The best cash Jisa I saw this week was from Coventry Building Society paying 3.5%. This is quite healthy considering most savings accounts don’t pay more than the current rate of inflation (3%).

Alternatively, the easiest way to invest in a shares Jisa is with a tracker fund. Your money just follows a stock market index up (and occasionally down). It’s all done by computers, not humans, so it’s cheap too. We’ve got a really simple guide to tracker funds here. You can start from as little as £25 a month via an online fund platform such as Fidelity, Hargreaves Lansdown or Interactive Investor. 

Finally, you might still have a child trust fund (CTF). This was the forerunner to the Jisa and has since been discontinued. Because it’s a legacy product, the rates and choice offered sometimes aren’t the best. The current advice is to move the CTF into a Jisa – you don’t lose any money. It’s simple to do too. Google the best Jisa rates and then approach the bank or building society of your choice and ask for a transfer form, they will do the rest. For investments, ask your preferred fund platform to do the transfer.

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Saturday, 22 September 2018