Parents-to-be saving into Junior ISAs

More than 1 in 4 parents-to-be are saving for their child’s future before they are born, research from a leading price comparison website has found. 

According to a study of 1,526 expectant parents by comparethemarket.com, 29% are saving an average of £79 a month into a Junior ISA for their newborn’s future. 

Expectant parents typically put away £1,204 by the time their child is 1 year old, saving an average of £904 before their baby arrives and £300 in the first year of their life.

An additional 17% said they will save over £2,000 before their newborn arrives.

58% of expectant parents are hoping to put money aside for their child each month, whereas 21% are planning to save on a weekly basis.

Education and university fees were the top reasons for parents to save money, with 30% saving towards paying their child’s university fees and 12% of respondents saving towards private education for their child.

Simon McCulloch, director of insurance at comparethemarket.com, said:

“At £9,000 a year, university fees are a significant investment and, when combined with current property prices, many parents feel they need to save now in order to give their children a helping hand in the future.

“It’s a good idea to put aside what you can before your baby is born and before the cost of childcare, nappies and baby clothes start to kick in.”

Junior ISAs

Junior ISAs are tax-free savings accounts a parent or legal guardian can open on their child’s behalf – so long as they’re under 18 and living in the UK.

Although parents/guardians can save into Junior ISAs, there are some limitations to be aware of:

  • you can only invest up to £4,128 a year into a Junior ISA
  • your child can only have 1 or 2 types of Junior ISA (cash or stock and shares) opened on their behalf in the same tax year.

The beneficiary can begin managing their account from the age of 16, although money saved cannot be withdrawn until they reach 18.

Once 18, their account automatically evolves into a cash ISA. If they continue saving into it, the adult ISA allowance (£20,000 in 2017/18) will apply.

Contact us to discuss your savings strategy.