For Best Results, Compare Junior ISA Providers

Posted on May 19, 2012


You’ve heard that the Junior ISA allows parents to save £3,600 each year for their child, and that that money will be available for withdrawal free of tax when your child turns 18. But how much will your investments grow, and how much can you expect after years of saving the full amount? This all depends on the individual account that you choose, which makes it imperative for parents to compare Junior ISA accounts and providers.

What’s important to you?

When you compare Junior ISA accounts, you’ll find that each provider has their own standards for how often you must make a contribution, the minimum balance required to start an account, and other terms and conditions. Another thing that will vary widely is the interest rate that the accounts offer, which is perhaps the biggest reason parents should compare Junior ISA accounts.

However, accounts also differ in terms of what they do: while some work more like traditional cash deposit savings accounts, offering a fixed or variable rate of interest, others give returns that depend wholly on the market. This means that parents need to compare Junior ISA types – either stocks and shares or cash deposit – and decide whether larger chances for growth or long-term security are important for them.

While cash Junior ISAs are much less risky, stocks and shares Junior ISAs usually outperform cash accounts over the long term (10 years or more). However, parents that choose a stocks and shares Junior ISA need to recognize the risk that their child could get back less than they invested.

Responsible investment

In addition, parents may want to compare Junior ISA providers that offer specialty Junior ISAs, such as an ethical Junior ISA. These types of accounts usually invest your child’s nest egg only in companies that have met global standards for responsible corporate conduct and investment. Parents who are looking to teach their children a lesson about savings may want to choose this kind of account, as it gives them the opportunity to talk to them both about financial responsibility and responsible investment.

Of course, parents should not forget to compare Junior ISA rates. The average rate of interest for a Junior ISA account is around 3%, which generally is much higher than other children’s savings vehicles, such as the Child Trust Fund. This is because banks and building societies recognize the potential amount of new customers from the Junior ISA, and are all vying for a slice of the pie with competitive rates.

Lean Schriban from writes about the Junior ISA and other tax-efficient children’s savings methods.

Posted in: Finance