What is a Junior ISA (JISA)?
Understanding Junior ISAs: Children's Savings Account
Our Stocks & Shares ISA has been popular with the Wombat community since day one. So we are excited to introduce our Junior ISA, designed to help parents and guardians save for their child's financial future.
In this article, we’ll answer all of the most common questions related to JISAs. Let’s get to it with the most obvious question…
What is a Junior ISA?
A Stocks & Shares Junior ISA, often called a JISA, is a tax-free savings and investment account. It’s designed specifically for young people under the age of 18, and is managed by a parent or guardian.
And we love JISAs for the same reasons lots of other people do. Quite simply, they offer savers and investors the best of all worlds.
- Tax-free savings up to the annual limit (more on that below)
- Access to popular Wombat features including themed funds (ETFs), global shares, Round Ups, and Auto Invest
- A good way to learn about investing and developing healthy money habits from an early age
Seems pretty simple, and it is. But there are different types of JISA.
Cash JISA vs Stocks & Shares JISA
There’s a Cash Junior ISA. This offers a set annual rate of return. This guarantees that the cash value of the ISA won’t go down, but does not protect against inflation (e.g. if the ISA interest rate is 0.5% per year, and inflation is 5% per year, the ISA isn’t keeping up, so you’re not getting the most bang for your buck).
You won’t pay taxes on any interest gains, capital gains, or dividends, with a Cash JISA. And there’s a Stocks & Shares JISA. This is what Wombat offers.
It’s important to note that while a Stocks & Shares JISA gives you access to more investing features, it is still investing, and so the value of the ISA can go up and down. This is why it’s important to think of your JISA as a long-term investment (even once it matures when the child turns 18 and it is handed over to them).
Wondering if your child can have more than one JISA?
A child can have a Cash JISA and a Stocks & Shares JISA, although Wombat only offers the latter. As a parent or guardian, you can only open one type of JISA per child (although as mentioned, we only offer the Stocks & Shares JISA right now).
Maximise your JISA allowance
Like a regular ISA, a JISA has an allowance. The allowance is how much you can contribute without being charged any tax. The annual tax allowance for a JISA in the 2023/24 tax year is £9,000. The tax year runs from April 6th until April 5th the following year.
The limit/allowance resets each year, and cannot be carried over (e.g. if you contribute £8,000 one year, your limit the following year is still £9,000, not £10,000). Your child can have either type, or both types of JISA, but only a maximum of one of each and their £9,000 tax-free allowance is shared across both accounts.
So, who can open a JISA?
A legal parent or guardian residing in the UK can open a JISA on behalf of a child. Children cannot open a JISA themselves.
It’s also important to note that as the registered contact for the JISA, the parent or guardian is responsible for managing the account (e.g. dealing with correspondence, updating details, and overseeing funds therein).
The child owns the money
This can cause some confusion, so we’ll be clear: the money in a JISA belongs to the child, and so cannot be withdrawn in all but exceptional circumstances. There’s more information about this on the Government’s website.
Once the child reaches 18, the JISA matures into a normal Stocks & Shares ISA, and they may manage it as they wish. And don’t worry, contributing to a JISA does not affect your personal ISA allowance, as they’re separate accounts. Lovely.
Want to transfer a JISA?
You can transfer an existing JISA (or Child Trust Fund) to Wombat easily if you’d like to take advantage of our features such as Themed Funds (ETFs), Global Shares, Auto Invest, and Round Ups.
The process is simple, and we charge no fees to transfer. To transfer a Junior ISA or Child Trust Fund, simply download Wombat if you haven’t already, and open a JISA account.
Open a JISA today
If you consider how inflation usually outpaces any benefits promised by the interest rates of a normal savings account, then yes, a JISA is worth it. A Wombat JISA is a Stocks & Shares JISA, which means it gives you access to the stock market, allowing you to make tax-free gains on investments.
Stocks & Shares ISAs, while subject to the volatility of the stock market, tend to go up in value over time, which is good news when you’re building wealth over a number of years.
JISAs are also a great way of getting kids involved in money-making decisions. They learn about patience, profits, loss, strategy, and planning. Why not get your child to have some input in where to invest, whether it’s in green technology, or their favourite luxury brands.
We could say that JISAs make good birthday presents, too, but we’re pretty sure most kids wouldn’t see it like that 😅.
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