Building a nest egg for a newborn child
Parents know all too well how much a small person can cost. But alongside nappies, pocket money, school trips and music lessons, there are longer-term costs that can seem quite intimidating.
The average cost of raising a child to the age of 21 is now projected to be over £210,000 . This is made up of university debt (£53,000), getting married ( £18,500 ) and a deposit for their first home ( £31,500 ). These expenses could be much more manageable if you plan well in advance.
The Government’s new Junior ISA offers you a big incentive to begin investing early for children, so you can get them off to the right financial start. If you open an account for your children, anyone can contribute to it. Throughout the lifetime of the investment, the Junior ISA is a tax-efficient way to save for your child’s future.
If you invest £300 a month from the birth of a child until they reach the age of 18, their Junior ISA could be worth nearly £108,000*– and there would be no income tax or capital gains tax to pay on these investment returns. *Figure assumes a growth rate of 6%, after charges. This example is for illustrative purposes and is not guaranteed. The value of investments can fall as well as rise, so your children may get back less than you invest.
Junior ISA at a glance
• A Junior Individual Savings Account can be set up in the child’s name by a parent or guardian
• You can set up a Stocks and Shares ISA or Cash ISA or a combination of both
• Any investment growth is free of income or capital gains tax
• Investment limit is £ 3,600 – this will rise in line with inflation from April 2013
• Available to each child in the family each tax year
• Anyone can contribute to a child’s account at anytime through the year
• Money is locked away until the child reaches the age of 18, giving your investment time to grow
• The child is the beneficial owner of the Junior ISA
Who is eligible for a Junior ISA?
• Junior ISAs are available to children who are resident in the UK and:
• born on or after 3 January 2011
• born before September 2002 and is under 18
• born between these dates and do not already have a Child Trust Fund
• Tax savings and eligibility to invest in a Junior ISA will depend on personal circumstances. All tax rules may change in future.
Who can invest in a Junior ISA?
• The Junior ISA must be set up by a parent or guardian
• Once it has been set up anyone can contribute to a child’s Junior ISA as long as the fund selection is made by the parent or guardian
1. The average cost of raising a child to the age of 21 is now projected to be over £210,000. (Guardian.co.uk 24 February 2011)
2. The average projected student debt for someone starting their course in 2012 is £53,000 (BBC News, 12 August 2011)
3. The average house deposit for a first-time buyer is £31,500 (The Telegraph, 12 February 2011)
4. The average cost of a wedding is £18,500 (www.weddingsday.co.uk, 11 October 2011)
About the author: George Pardew is a writer and supports junior ISA accounts.
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