Key Characteristics:
- Parents with savings set aside for their children
- Junior ISA
- Long-term investment horizon
Setting up a Junior individual savings account (Isa) is a wonderful thing that you can do for a child’s future. You can put up to £9,000 per year (as of 2020/21 HMRC rules) in this tax-free wrapper for each child under 18.
Because children don’t have regular outgoings or financial commitments and won’t need the money for several years (the younger you get investing, the better), you can use higher risk assets to drive higher returns. That said, if your child is likely to want to use the savings set aside for them to fund higher education, traveling or a house, it is worth keeping an eye on the time horizon and adjusting the portfolio to a more cautious asset allocation before they need the money.