What To Do With Your Junior ISA

This week marks the 10 year anniversary of the Junior ISA, which may lead some parents to reflect on whether the tax free savings account has led to some meaningful returns. Three fifths of Junior ISAs are held in cash, according to research by F&C.

However, it appears returns regret has bitten some parents - upon realising the financial returns missed by saving, a third of those parents say they wished they had invested the money instead. Among Interactive Investor account holders, of those who invested in stocks and shares JISAs there are 110 with a value of more than £100,000 and a further 1,078 with between £50,000 and £100,000.

Junior ISAs can be opened for any child living in the UK under the age of 18 and parents can contribute up to £9,000 each tax year.

When savings are held in a cash JISA all interest earned will be shielded from tax, while those who invest in a stocks and shares JISA will be shielding any dividends or capital gains. Almost half of parents favour the cash JISA because they think it is a safer option than investing, according to F&C Investment Trust.

However, with the market leading cash JISA deal paying 2.5%, there is an argument that your money will be better served invested in stocks and shares after all, 18 years is a long investment term.

Also, an element of investing that perhaps isn't mentioned enough is the power of compounding that investors and even savers can benefit from, especially over the long-term when investing for children. The interest, dividends or capital growth you make on what you put in a savings or investing account will snowball overtime and as it grows you are essentially earning return in every gain you make.