The interest rates on a cash Junior ISA can be pretty high compared to a standard adult one. Again, though, you’ve got to keep in mind that you’re losing cash if your interest doesn’t match the rate of inflation. Your child can take over control of the ISA from the age of 16, but won’t be able to take anything out of it until they’re 18.
Junior ISAs can be mixed and matched, but your kid can only have one of each type. That £9,000 pay-in limit we talked about counts across all the ISAs you’ve got, though. As for which is better, it depends on what your plans are. If you asked a financial adviser, they’d probably tell you it’s only worth considering a stocks and shares Junior ISA if you’re happy locking the cash away for 5 years or more. Generally speaking, longer investments like this can help you ride out any short-term “jumpiness” in the stock market. For the same reason, you’ll probably be advised that the younger your child is, the more risk it’s okay to take with the money.
Depending on the rules of the Junior ISA you’ve picked, there might be some strings attached about how you move money in or out of it. Some have a minimum monthly pay-in, or restrictions on withdrawals. Keep an eye out for these when you’re making a decision. You don’t want to get stuck without access to cash you might need in a crisis, for instance. If you think there’s a chance you might need to dip into your kid’s savings to cover emergency costs, for instance, you might be better off opening an easy-access children’s savings account instead. Watch out, though – if your child gets over £100 in interest from money you’ve paid in, you’ll get stuck with a tax bill if it’s over your own Personal Allowance.
If you want to dive into stocks and shares ISAs in a bit more detail, take a look through our other article, “Best Beginner Investment Funds For 2022”.