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The earlier you start saving for your child’s future the better, but that is not to say that if you have not started at birth, you may as well not bother. Far from it, even starting when your child is aged 10 can still give a significant amount of money for them to use when they reach 18.
For example, if you put £4,128 a year into a Junior ISA each year from birth until your child reached 18 – and they then did not touch that money until they reached 21, then a 5% a year return would give a very generous fund of £141,200. Even starting the same process with the same returns from age 5 would give your child a £98,300 fund at age 21, and even leaving it as late as 10 would still give you a £55,300 fund at age 21. It really is never too late to start, as you may find that some years the growth far outstrips the estimated growth – but the reverse can also happen, and you may get less than expected in some years.
Accumulated ISA funds at age 21 with a maximum of £4,128 invested each year until age 18
In reality, you may not be able to invest as much as this, our regular investment service allows you to save monthly from as little as £25 per month. This service is available in our Junior ISA, Junior SIPP and dealing accounts for children. Additionally, you can add lump sums as you wish to boost the savings, provided you stay within any limits set out by the taxman.
Since parents, grandparents, other relatives and friends can also add to your child’s savings pot, you have the flexibility to make additional contributions when you need to. But the limits imposed on the Junior ISA of £4,128 a year and the Junior SIPP of £3,600 a year including tax relief must be adhered to, no matter who puts money into the fund for your child.
These are the tax rules as they stand, and there is a chance they will change in the future so you should always check you are working within the correct parameters for the particular year you are investing. Investments will also rise and fall over time, so be prepared to see the value of the fund go up and down – it is not necessarily always going to be in positive territory.