Our little bundles of joy aren’t little for very long. My baby turned one last week and the past year has gone by in the blink of an eye. With time moving on so quickly, saving and investing for our babies when they are young could be a good idea. However, when you’re up to your eyes in nappies, its not always at the forefront of your mind. The budget for baby savings goals can be light at best when they’re small. So starting early could make it possible to put an affordable amount away for them now, which could add up over the long term.
Getting started with an ISA or JISA
There are many ways to start a savings or investment plan for babies. A baby can hold an ISA called a Junior ISA and this is one way to make tax efficient investments for your baby within their £4,080 annual allowance this year. You can also use your own ISA allowance to open an individual savings account and make investments for the baby you cherish, as long as you remain within your annual ISA allowance of £15,240.
Both ISA options are offered by Scottish Friendly in the form of an Investment ISA like My Choice (ISA) or Investment Junior ISA like My Choice (Junior ISA), also known as a Stocks and Shares ISA and Stocks and Shares Junior ISA. They’ve been designed to offer an affordable way to invest for you and your babies future goals, with payments starting from just £10 a month. You must remember though that stock market investments can go down as well as up and you or your child could get back less than you paid in. Tax treatment depends on individual circumstances which may change in the future.
Differences between ISA and JISA
The main difference between Scottish Friendly’s adult and baby ISA products is that the Junior ISA belongs to your baby and the adult ISA belongs to you. This means that when your baby becomes an adult at the age of 18, they receive the payout from their Junior ISA to spend as they choose. Once set up family members can also make investments towards your investments for grandchildren by setting up a pot named, for example, ‘From Gran’.
With an adult Investment ISA you invest for your baby using your own ISA allowance. This means that you get to decide when they receive the money, for example, when they get married or move into their first home. So Mum and Dad are in control of the spending!
It’s up to you to decide how to save and invest for their future adventures. They’re not little for long so starting early, even with a small sum, could be beneficial in building towards their future. Scottish Friendly could help get you started.