Home Money Parents shun their own savings to open Junior Isas for their children

Parents shun their own savings to open Junior Isas for their children

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A present for the future: The number of Junior Isas opened by parents for their children has grown by 101% since 2019
  • The number of Junior Isas opened by parents since 2019 increases by 101%
  • Parents have been avoiding their own Isas to open a Jisa for their children.

Parents and carers have been putting aside opening Isas for themselves to prioritize opening Isas Junior for their children, new data suggests.

Between October and December 2023, the number of Jisas opened by parents and guardians soared by 101 per cent since 2019, exclusive data for Scottish Friendly’s This is Money reveals.

It indicates that planning for future generations has assumed a greater priority for parents and guardians.

Figures show that the shift of parents and carers prioritizing saving for their children over themselves has resulted in a drop in Isa investments over the same period.

A present for the future: The number of Junior Isas opened by parents for their children has grown by 101% since 2019

Mothers lead the way when it comes to opening new Junior Isas for children. Since the beginning of 2019, the number of new Jisas opened by mothers has increased by 115 percent.

In comparison, the number of parents opening a new Jisa for their children increased by 87 percent.

The boost in Jisa investments was most prevalent among younger parents, ages 18 to 34. The number of Jisas opened by parents in this age group has increased 35-fold compared to 2019.

– Check our table of the best Junior Isa rates here

The amount of money parents and carers invested in Jisas after summer 2023 also increased by 107 per cent despite continued cost of living pressures and the looming Christmas period.

At the time, the best Jisa paid a rate of 4.7 per cent and was offered by Coventry Building Society, according to rate evaluators Moneyfacts Compare.

Jisa’s best rate is now 5.49 per cent and is offered by Bath Building Society.

All regions of the UK have seen an increase in new Jisas opened by parents and carers since the start of 2019.

But Scotland surpassed this figure with a 191 per cent increase, closely followed by the East Midlands, which saw a 147 per cent rise in the number of open Jisas.

Kevin Brown, savings specialist at Scottish Friendly, said: “Clearly, saving and investing for children remains a priority for families across the UK and more must be done to support and encourage this where appropriate.”

‘The government has recently hinted that Isa reforms may be coming and we believe that changing the rules to allow other family members, such as grandparents, to also open Jisas would provide a much-needed boost to children’s savings.

“Removing such restrictions can only help put children on a stronger financial footing as they approach adulthood and should therefore be seriously considered in any planned reforms.”

New Isa age changes will come into force in April 2024

As part of the Government’s Isa reform package, which comes into force on April 6, 2024, there will be a change to the age at which a cash Isa can be opened.

At the moment, you can open a regular Adult Cash Isa at age 16, while you must be 18 to open an Adult Stocks and Shares Isa.

The Personal Savings Allowance (PSA)

The PSA was introduced in April 2016 by the then chancellor, George Osborne.

Basic rate taxpayers qualify for a £1,000 PSA. This means they can receive up to £1,000 a year in tax-free savings interest.

Higher rate taxpayers have a PSA of £500 each year.

Additional rate taxpayers do not receive a PSA.

The PSA has remained at the same level since its introduction, even though savings rates are now almost three times higher than they were then.

From the new tax year, you will need to be 18 to open a cash Isa or a stocks and shares Isa.

The Government says this will bring cash Isas in line with the age requirement that already exists to open Stocks and Shares, Innovative Finance and Lifetime Isas.

Anna Bowes, co-founder of the Savings Champion website, says: ‘This change means young people will not be able to deposit up to £20,000 into a cash Isa at ages 16 and 17 – that’s £40,000.

‘It’s unlikely they had that kind of money themselves, so it’s possible one of their parents gave it to them.

“But of course, if that were the case, although any interest earned on the Isa would be tax-free to the child as it was donated, the parent might have to pay tax at their own marginal rate.”

Generally, there is no tax to pay on children’s savings accounts, including Jisas.

If in the tax year a child earns more than £100 in interest on money contributed by a parent into a savings account or Jisa, the parent will have to pay tax at their own marginal rate on all the interest if it is higher than their own. Personal Savings Allowance.

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