Why would you pick this admittedly riskier route for your child’s savings? Well, for one thing you’re banking on getting better returns than with an ISA that pays a flat rate of interest. While they’re less predictable than cash ISAs, stocks & shares ones are often able to perform better over time. So, if you’re worried about inflation eating away at the value of your child’s savings, stocks & shares ISAs might be worth looking into.
You don’t need to be an investment expert to use a stocks & shares junior ISA. You can pick a ready-made one that basically chooses and manages the investments for you. There may be some platform or management fees for this, depending on your situation and ISA, but it does take a lot of the effort and hassle out. Instead of deciding on every investment separately, you choose an ISA with a pre-set “basket” of them. Your decision will be based on the level of risk you’re prepared to accept.
If you’re willing to put the work in, though, you can go for a self-invested ISA instead. With these accounts, you pick and choose your own investments more directly. Financial advisers often talk about the importance of “diversifying your portfolio” – which is basically just a technical way of saying don’t put all your eggs in one basket. Spreading your investments out over a wider range of businesses and markets is usually safer than putting all your savings in one place.
Whichever option you decide on, always remember that no investment in stocks & shares will ever be 100% safe. The value of this type of ISA can drop as well as climb, even with investments that tend to be low-risk. Make sure you go in with both eyes open, and never take risks with money you can’t afford to lose.
To learn more about investing in stocks and shares, take a look at our other article, “Best Beginner Investment Funds for 2022” - and keep checking back here for more money tips and updates. We’re experts at saving you cash and we’re always here to help. That’s the reason why you’re better off with RIFT.