rtmark
LearnBonds UK

Top 7 Junior Childrens ISAs for 2020

If your child doesn't already have an active child trust fund, then a Junior ISA is a great way to give your child a head start in life. Read on to find out more.
Avatar
Author: Edith Muthoni

Last Updated: September 4, 2020
Junior ISA
Junior ISA

There is only so much you can do to give your son or daughter a proper head start in life, and key among them include starting saving in a junior account early on, but the conventional children’s savings accounts are flawed in more than one way.

Top Junior Childrens ISAs...They, for instance, will only pay negligible annual interests that are then taxed against your incomes. Enter the Junior Individual Savings Account (JISA), a tax-free savings scheme for children under the age of 18 years. Your yearly contributions to this account, currently capped at £9,000, are tax-exempt and so is interest earned. The value of investments can go up and down and you may not get back all of your initial investment.

You also have the choice of working with either of the two types of junior ISAs currently available, the Cash ISA account and Shares and Stocks ISA. The junior ISA refers to an account where contributions are held in cash deposits and earn a fixed interest over the years that is reinvested into the account. Junior Stocks and Shares ISA’s, on the other hand, refer to deposits held by a stock market investment company and use these funds to buy and sell financial instruments.

 

Table of Contents

    Hargreaves Lansdown

    Our Rating

    • Gain access to 2500+ share and stock investments
    • Expertly maintained portfolio with administration fees as low as 0.45%
    • Tax-free returns compounded throughout the investment period
    Note: The Junior ISA is only available to children without an active trust fund. You can, however, transfer your child trust fund accruals into a Junior ISA.

    How does a Junior ISA work?

    Small cartoon man stood infront of a red question markUnlike adult ISA accounts where contributions can be withdrawn anytime, junior ISA investments are locked and will only be active after the child turns eighteen years. Upon reaching 16 years, however, the child can take control and start managing the fund, but will still not be able to access it until after 18 years. Upon maturity, the full deposit as well as any accrued interest is available for withdrawal, tax-free, and can be used to help reach their life goals or transferred to a type of adult ISA.

    Best junior ISAs currently available: Reviewer’s choice

    REVIEWERS CHOICE

    Hargreaves Lansdown – Junior ISAs

    Rating

    Account Type

    Junior ISAs

    Fees

    0.45% per year on first £250,000, £5.95-£11.95 per trade

    Minimum Investment

    £100

    Rating

    Visit Now

    Product Details

    • Appeals most to investors looking for the lowest investment minimums

    Key Facts

    • Low minimum investment starting from £100
    • No limit on transfers-in

    Pros

    • Offers a huge pool of investment options
    • Low management fees ensure you get more in returns
    • Anyone can contribute to your child’s Hargreaves Lansdown  junior ISA

    Cons

    • Not FSCS insured
    • Fluctuating returns

    AJ Bell YouInvest

    Rating

    Account Type

    Junior Children ISA

    Fees

    0.25% per year, £1.50-£9.95 per trade

    Minimum Investment

    £500

    Rating

    Visit Now

    Product Details

    • Hailed as one of the most diversified junior stocks and shares ISA account

    Key Facts

    • Access the widest range of investment opportunities 6300+
    • Low asset management fee – starting from 0.25% p.a
    • Interests compounded over the years for profit maximization

    Pros

    • Negligible management and administration fees
    • The widest pool of investment options to choose from
    • Easy to open and manage a junior ISA account online

    Cons

    • One may consider the £500 minimum deposit prohibitive

    WealthSimple Junior ISA

    Rating

    Account Type

    Junior ISA

    Fees

    0.5%-0.7% per year, 0.2% average fund fee

    Minimum Investment

    No minimum

    Rating

    Visit Now

    Product Details

    • Best for automated investments managed via a robo-advisor

    Key Facts

    • Will manage your first deposit of below £10,000 free of charge for 12 months
    • Grants you access to a robo advisor with over nine investment portfolios
    • No minimum initial investment or preset monthly contribution required

    Pros

    • No minimum deposit required
    • Auto managed investments ensure you don’t need prior stock trading skills
    • Supports both the inter-junior ISA and child trust fund transfers

    Cons

    • Multiple administration fees eat into possible returns
    • A limited number of investment portfolios that may not address your diversification needs

    Fidelity – Junior ISA

    Rating

    Account Type

    Junior ISA

    Fees

    £2.08 per month, 0.35% if above £7499.99

    Minimum Investment

    £1,000

    Rating

    Visit Now

    Product Details

    • Appeals most to experienced traders that want to actively manage their investment

    Key Facts

    • Have access to your investments 24/7
    • Easy account opening and management online or via Fidelity banking mobile app
    • Access a huge market of locally traded low-cost securities

    Pros

    • Wide range of local and international stock markets to invest in
    • Gives you 24/7 access to your investments
    • Avails several tools

    Cons

    • Prohibitive minimal initial deposit of £1,000

    One Family – Junior ISA

    Rating

    Account Type

    Junior ISA

    Fees

    1.5% per year

    Minimum Investment

    £10

    Rating

    Visit Now

    Why open a junior ISA for your child?

    • Savings for significant future goals: Would you like to help your child buy a house, have enough savings to see them through college debt-free, or would you like to help them establish their first business? The junior ISA helps you start planning on your child’s future today.
    • Cushion against unseen eventualities: One of the primary reasons parents/guardians invest in the future of their children whether it is through quality education, insurance, child trust fund or a savings account is to ensure that they empower the child and help cushion them against future eventualities. What happens if you are not there, or are unable to attend to their needs by the time they hit eighteen? A junior ISA goes a long way in giving them the all-important head start in life, especially when you are unable to.
    • Encourage a saving culture: Teaching your child how to relate with money early on in such bits as when to spend and how to save is one of the most invaluable life skills you can impart in the child. Helping them open a Junior ISA, therefore, instill a saving culture that can push them through life.
    • Reduces tax burden: You can invest up to £9,000 into your child’s junior ISA account every year tax free.
    • High prospect for capital growth: If you opened an ordinary savings account with a commercial bank, the only returns you get from your account is the negligible annual interest that is subject to taxation as ordinary income. Junior ISAs, on the other hand, can not only offer slightly higher interests, but the amounts inside the tax wrapper can be invested in more lucrative ventures such as shares and stocks investments.

    What are the pros and cons of opening a Junior ISA account?

    Pros

    • The fact that interest earned is reinvested compounds the capital growth rate
    • You can easily transfer your capital across different investments
    • Junior ISAs often offer better returns compared to bank savings accounts
    • Both parents and family members can contribute to this account
    • Poses a high prospect of capital growth if you choose your investment well

    Cons

    • Rigid as funds will only be accessed by the child after hitting 18 years
    • The child has the final word on how they spend this cash and wastage drowns years of sacrifice
    • Stock and shares junior ISA accounts are subject to market volatilities and significant potential for loss

    Criteria used to rank the junior ISAs:

    • Number of funds available for investment
    • Investor reputation, regulation, and insurance
    • ISA transfer-friendly
    • Interchangeability between cash and investment ISA
    • Annual return for cash accounts
    • Administration fee and trading costs
    • Minimum deposit amount[/su_list]

    Best junior ISAs currently availabl

    1. AJ Bell Youinvest Junior ISA

    AJ Bell’s Youinvest Junior ISA is a stocks and shares investment account but with the widest pool of investment options. The company promises you access to over 6300 funds, shares, ETFs and low-cost stocks traded locally and internationally. You only have to open the account and make your initial deposit, with the minimum allowed here being £500 and subsequent monthly contributions starting from £25.

    Compared to equally reliable junior ISA providers AJ Bell has the lowest management fee that starts from 0.25% annually, for your total investments.

    • Negligible management and administration fees
    • The widest pool of investment options to choose from
    • Easy to open and manage a junior ISA account online
    • One may consider the £500 minimum deposit prohibitive

    2. WealthSimple junior ISA

    WeathSimple, yet another junior shares and stocks investment ISA provider, promise to manage the first year deposits of less than £10,000 for free. Administration fee for the subsequent years is capped at 0.7% per annum, with a further additional 0.2% + 1.5% fee charged for particular underlying funds.

    We nonetheless appreciate the fact that Wealthsimle is all-welcoming and doesn’t demand a minimal initial deposit to open an account here. They also adopt a relatively new and unique approach to the junior shares and investment market where they offer to manage the investments on your behalf through a robo-advisor. You, however, start by answering a set of questions to test your goals, time limit, and risk tolerance after which your funds are invested in one of their 9 preset investment portfolios.

    • No minimum deposit required
    • Auto managed investments ensure you don’t need prior stock trading skills
    • Supports both the inter-junior ISA and child trust fund transfers
    • Multiple administration fees eat into possible returns
    • A limited number of investment portfolios that may not address your diversification needs

    3. Fidelity Junior ISA

    Fidelity Junior ISA makes it here because of the banker’s solid reputation in the finance industry, ease of opening the junior savings account online and low-cost transfers. Embracing digital technology has seen the Fidelity launch a mobile app through which you can register and manage your junior ISA account.

    Like most other credible shares and stocks investment ISA providers, Fidelity gives you access to a wide range of locally-traded ETFs, funds, and shares that you can then manage online 24/7. You will, however, need an initial investment of £1,000 or a monthly savings plan of £50 that can also be contributed by friends and extended family.

    Our Rating

    • Wide range of local and interactions stock markets to invest in
    • Gives you 24/7 access to your investments
    • Avails several tools
    • Prohibitive minimal initial deposit

    4. Scottish Friendly My Select Junior ISA

    Scottish Friends is an FSCS registered and insured mutual fund that also offers the Junior IAS service. We like it because of its rather straightforward approach to junior investments that starts with the ease of registering an account and extends to some of the lowest initial deposit amounts that is currently set at £10.

    You will also get a £50 welcome bonus for registering a junior account with the mutual fund. What we like most about Scottish Friends junior account is the investor provides you with over 8 investment portfolios to choose from. And if you want a rough idea of how much you stand to gain from the investment over the years, they have an online calculator for this.

    • Low minimum deposits
    • You don’t need prior stock trading experience
    • FSCS insured funds
    • The 8 investment portfolios availed here may not capture every parent's savings/investment needs and goals

    5. One Family Junior ISA

    One family manages in excess of £7 billion deposited by 2 million customers across the country. In 2018, they were named the best Junior IOSA provider by Moneyfacts for running one of the most flexible and easy to use junior ISA account platforms. This is exhibited by the fact that you can fully manage your account online.

    The investor also provides parents with one of the most flexible monthly payments plans by letting you decide how much you want to contribute monthly, between £10 and £355. Their online account management features also make it possible to regularly update the account details as well as track the funds’ performance by requesting regular financial statements. And if you register and fund a junior ISA account today and commit to contribute £20+ monthly, One Family will gift you a £50 Amazon E-voucher.

    • Time-saving online money management tool
    • Dedicated customer service
    • A wide array of funds, stocks, bonds, and shares to invest in
    • Returns are not guaranteed
    • One may consider the average 2% annual returns for low-risk ventures considerably low

    6. Coventry Junior Cash ISA

    Coventry Building Society allows for the creation of the Junior Cash ISA that doesn’t demand a minimum initial deposit. Parents and guardians can therefore open and run a junior ISA online, over the phone or by walking into any of the society’s branch office and deposit £1. At 3.60% per annum, Coventry offers the highest interest rate for any junior cash ISA we have come across.

    They also have a rather elaborate platform with an online calculator that lets you determine how much your child will receive when they turn eighteen.

    • No minimum deposit
    • Relatively higher annual return rates
    • Online calculator helps determine the value of the ISA at maturity based on current contributions
    • One may consider the 3.6% rate relatively low compared to shares ISA

    7. Danske Bank Junior Cash ISA

    With an average annual interest rate of 3.45%, the junior cash ISA offered by Danske Bank comes off as one of the most attractive junior ISA providers.

    What we found most interesting about Danke’s junior ISA account is the fact that their interest is calculated and paid into the account on a daily basis. And should they decide to lower this rate they will give a two-month notice while interest rate appraisals will take effect immediately.

    Our Rating

    • Risk-free investment
    • Performance not affected by the stock market volatilities
    • Higher returns than commercial bank savings
    • Posts little returns when compared to the shares ISA

    How do you determine the best Junior ISA provider to bank with?

    The ultimate goal of opening a junior account ISA is to accumulate as much money for your child here as you possibly can. But you also don’t want aggressive investments or mismanagement of your investments blowing up your account. When deciding on what the best ISA account is for you, consider such factors as:

    • Risk/reward:  What is your risk tolerance level and how far are you willing to compound the growth rate of the deposited amounts? If you are more risk averse, you will be drawn to the less risky cash ISAs but if you are more reward conscious, you will be drawn to the riskier but more rewarding shares and stocks investments ISAs.
    • Transferability/interchangeability: Do the Junior ISA providers allow for interchanging the type of ISA account from cash to investments and vice versa? And if they don’t, what is their ISA account transfer policy? Take this into consideration when signing up for an account.
    • Fixed/variable returns: Most Junior Cash ISA guarantee steady, almost fixed, returns. Shares and stock ISAs on the other hand, have highly fluctuating rates of returns that are to a large extent influenced by the market volatilities.
    • Returns/management fee: You also have to compare the junior ISA provider’s rate of return with the management fee. What is the impact of this fee on the account’s net return?

    Bottom line

    Whether you look forward to helping your son buy their first car, pay off university education, or even start their first business, you are better off saving for this in a Junior ISA than the conventional savings account offered by the banks. They promise higher returns and also present you with more effective ways of investing the deposited amounts to further compound its growth rate. ISA savings are also tax-free. There are however two types of junior ISAs, the cash and shares/stock ISA, and making the right choice starts with figuring out whether you are more interested in growing the capital deposited or shielding it from unnecessary risks.

    Hargreaves Lansdown

    Our Rating

    • Gain access to 2500+ share and stock investments
    • Expertly maintained portfolio with administration fees as low as 0.45%
    • Tax-free returns compounded throughout the investment period

    Glossary of ISA terms

    Trading Platforms Glossary
    Cash ISA

    A cash ISA is a form of Personal Savings Allowance that works like ordinary savings account safe for the fact that you don’t pay tax on interests earned. It is tax-free savings account for UK citizens. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Stock and Shares ISA

    A share and stock ISA is a tax-free investment account provided by a brokerage that lets you invest in a wide range of securities including individual shares and stocks, trusts, and funds. Tax-free means that you don’t get to pay dividend tax or capital gains tax on the shares and stock incomes. The maximum you can invest in this ISA for the year 2020 is £20,000

    Trading Platforms Glossary
    Innovative Finance ISA

    Innovative Finance ISA is a tax-free investment account that lets you invest in the peer to peer lending platforms. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Junior ISA

    A junior ISA is a tax-free and long term Child Trust Fund that a parent or guardian can open for their underage children. A 16-year old can also open a Junior ISA but will only access the funds therein once they turn 18. The maximum you can invest in this ISA for the year 2020 is £4,368

    ISA Glossary
    Property ISA

    A property ISA is simply a share and stock ISA that will only invest in residential real estate properties. It is a share and stock ISA that buys solely into residential property portfolios.

    Trading Platforms Glossary
    Lifetime ISA

    A lifetime ISA is a savings account available to individuals between 18 and 40 years who are looking to save for a comfortable retirement. A Lifetime ISA account holder can deposit £4,000 into the account for 2020, and with every contribution, the government tops it up with a 25% bonus. You will not be able to contribute to the ISA once you reach 50 years and the funds can be used for retirement or re-channeled towards purchasing your first home.

    ISA Glossary
    Easy Access ISA

    An easy access ISA is simply a form of cash ISA that makes room for regular withdrawals of earned profits. It is mostly associated with cash ISAs that pay variable terms and allows you to withdraw the tax-free income gained here regularly. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Fixed-Rate ISA

    A fixed-rate ISA is a form of Cash ISA that pays fixed interest rates on savings. The funds in the account have to be locked for a predetermined period of time – usually between 1 and 5 years- with premature withdrawals attracting heavy penalties.

    ISA Glossary
    Retirement ISA

    A retirement ISA is a savings account available to individuals between 18 and 40 years who are looking to save for a comfortable retirement. A retirement ISA account holder can deposit £4,000 into the account for 2020, and with every contribution, the government tops it up with a 25% bonus. You will not be able to contribute to the ISA once you reach 50 years and the funds can be used for retirement or rechanneled towards purchasing your first home.

    ISA Glossary
    Help-To-Buy ISAs

    A Help To Buy ISA is a special saving account designed by the U.K. government to help its citizens save for a mortgage deposit for their first home. You can only save up to £200 per month into the help to buy ISA with the government topping you up with an additional 25% bonus. Plus, help to buy ISA is only available to individuals and couples looking to buy their first home.

    FAQ

    What is a Junior ISA?

    A Junior ISA can be viewed as the children version of the conventional Individual Savings Account (ISA). A savings account specially designed to help ease your child’s transition into adult life

    Who can open a junior isa account?

    Only the parents or legal guardians to child, and United Kingdom residents, can open Junior ISA in the child’s name. Anyone, including parents, grandparents, relatives, and friends can, however, contribute to this account.

    How much can I save in a junior ISA?

    For the financial year 2019/2020, you can deposit a maximum £4,360 into this locked savings account that will only be accessed by your child upon turning 18 years. You, however, don’t have to feel obligated to hit this maximum every year or contribute regular funds into it. You are free to fund the account with as much or as little as you can afford at any given time, as long it falls within the maximum allowable limit.

    How much can the deposits in a Junior ISA make?

    To a large extent, this depends on the type of account and the amounts deposited therein. It is, however, important to note that returns for most Cash ISAs average between 2% and 4%. Returns for the shares Junior ISAs are considerably higher but highly inconsistent given the stock market volatilities.

    What is the difference between the child trust fund and junior ISA?

    They both serve the same purpose of helping shape a child’s future early on. The government started the CTF program in 2002 and automatically opened a £250 account for every child born between 1st September 2002 and 2nd January 2011. Junior ISA is, therefore, the better and improved version of CTF and previous contributions to a CTF account can now be transferred into a Junior ISA.

    Which is the better of cash and shares Junior ISA?

    The answer to this is quite relative and highly dependent on such factors as your risk tolerance level and the amount you hope to raise before its maturity. Most parents are however inclined to investing in the shares and stock junior ISAs given that the long periods before the maturity of these accounts create enough room to fail, learn, and prosper.

    Who does the money in a Junior ISA belong to?

    You may have solely contributed to the Junior ISA for years and even have near-absolute control over it but the funds therein are your child’s. Only the child can withdraw from the account after reaching 18 years. They may also opt to assume control of the account and the deposits therein after hitting 16 years.

    ISA
    ABCDEFGHIJKLMNOPQRSTUVWXYZ#
    All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
    Avatar

    Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, commodities, forex, indices, bonds, and cryptocurrency investments. She holds a Masters degree in Economics with years of experience as a banker-cum-investment analyst. She is currently the chief editor, learnbonds.com where she specializes in spotting investment opportunities in the emerging financial technology scene and coming up with practical strategies for their exploitation. She also helps her clients identify and take advantage of investment opportunities in the disruptive Fintech world.

    Write first comment

    Reply

    Your email address is not published.