Putting money away for children or grandchildren is a good way to teach your children about saving money and will help give them a head start in life.
At Four Wealth Management, we work with our clients on intergenerational wealth management. This is financial planning for the whole family and our Financial Advisers encourage families to discuss finances together.
Clients often have a lot of questions about saving for their children, here are the answers to some common questions that our Financial Advisers are asked about saving for a child’s future.
How much could I save for my child in a Junior ISA?
The current Junior ISA (JISA) allowance for the 2019/20 tax year is £4,368. You can choose to invest this as a lump sum or contribute to the Junior ISA monthly up to the maximum allowance.
By way of example, if you invest the maximum allowance of £4,368 every year into your child’s Junior Stocks & Shares ISA from when your child is born until the age of 18, their Junior ISA could be worth £129,026.37 when they reach the age of 18 based on an annual growth rate of 5%.
This figure is only an example and is not guaranteed – it is not a minimum or maximum amount. What you will get back depends on how your investment grows and on the tax treatment of the investment. You could get back more or less than this.
Please note, the annual allowance often increases in the new tax year, your Financial Adviser will let you know if you can increase your contributions.
What is the best investment for a child?
At Four Wealth Management, your Financial Adviser will work with you to tailor a portfolio for your child in line with your goals.
Can I set up a pension for my child?
Yes, you can open a pension for your child if you want to save for the long-term. The age your child could access the money in a private pension is rising to 57 in 2028 and may increase again.
What are the income tax rules for children?
Normally children do not have to pay tax as they do not earn any money. Children get a personal tax-free allowance at the same rate as an adult which is £12,500 for the 2019/20 tax year.
If they get income from interest on savings or investments, there are extra tax-free allowances in addition to the personal allowance, allowing a child to potentially earn up to £18,500 tax-free in the 2019-20 tax year.
Do children pay tax on a Junior ISA?
Any assets held in a Junior Stocks & Shares ISA and any investment growth is free from further liability to Income and Capital Gains Tax.
Can my child control the Junior ISA?
If you open a Junior Stocks & Shares ISA for your child, the JISA will automatically become an adult ISA when they turn 18. They then have full access to the assets and can manage the adult ISA themselves.
Start saving for your child’s future today
Contact Four Wealth Management to find out more about starting a Junior ISA for your child.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.