A Junior ISA fit for a royal10 July 2013
The country is set for a spurt of royal babies over the next few months, with the Duke and Duchess of Cambridge’s first child due within weeks, and the news that Zara Phillips and Mike Tindall are also expecting a baby. Everyone knows that bringing up children can be expensive. Research shows that the average monthly cost of raising a child is £537.* With this sizeable figure in mind, it can often be a real headache for parents to juggle the everyday expense of bringing up a child as well as trying to build a nest egg for the long term.
For the new prince or princess, emulating his or her father’s upbringing will be especially costly. If they attend a school such as Prince William’s old haunt Eton for example, the fees alone will be an eye watering £10,689 per term. Even if your child attends a state school, latest figures have revealed that this could amount to more than £1,600 per child per year.**
And the costs keep on coming even when a child is 18 because these days over 40% of children go on to higher education, up from 6% in the early 1960s. A child attending St. Andrews University, where Kate and William met, will face fees of around £9,000 per academic year plus living costs. Some estimates suggest the full cost of a three year degree at a top university is already £50,000. Therefore, unless you have a royal bank balance, it is important to start tucking money aside for your little prince or princess at the earliest opportunity. One way to do this is through a Junior ISA; a tax-free savings account for children.
Simple to set up through an online application form or through the post, a Junior ISA comes in two types; a ‘Cash’ and a ‘Stocks and Shares’ Junior ISA, such as Bestinvest’s Select Junior ISA***. With a stocks and shares Junior ISA, your cash is invested and you won’t pay tax on any capital growth or dividends you receive. Your little one can even have both types if you would prefer.
The maximum total amount paid into a Stocks and Shares Junior ISA for this tax year is £3,720. While the money in your child’s Junior ISA can’t be taken out until they are 18, it is the parent or guardian who opens it who is responsible for managing the account. If your child is 16 or older they can
become the registered contact for their Junior ISAs and open a regular ISA or when they turn 18 they can take out any money in their account.
Jason Hollands, Managing Director of Bestinvest said: “A Stocks and Shares Junior ISA is a great way to set your little prince or princess on the right track in life. Young people are increasingly beginning adult life with significant financial burdens on their shoulders and parents who are in a position to do so should start saving at the earliest opportunity.
“Saving little and often, perhaps via Direct Debit or a standing order can ease the financial burden of putting money aside for the future. Providers such as Bestinvest allow your child’s Junior ISA to be converted into a standard Bestinvest Select ISA on the child’s 18th birthday so they can continue to benefit from the tax savings, perhaps to spend on university fees or on a deposit for their first home.”
If your child already has a Child Trust Fund:
At the moment, a child is not able to have a Junior ISA if they were eligible for a Child Trust Fund (CTF) account. However this could change. As flagged in the Budget earlier this year, the Government has launched a consultation into allowing Child Trust Funds to be transferred into Junior ISAs, a measure which Bestinvest has been calling for over the last year.
Jason Hollands commented: “Bestinvest has highlighted the poor choice and lack of competition in the Child Trust Fund market as well as the limited number of mainstream providers. It is encouraging that the government is considering CTFs to be transferred into Junior ISAs.”
Download Bestinvest’s free guide to investing for children here or at:
*Research: Santander - Survey conducted online by Opinium Research 26 - 29 April 2013 among a representative sample of 2,002 UK adults.
** Research: Aviva School Sums index
***For more information on Bestinvest’s Junior ISA please visit: www.bestinvest.co.uk/juniorisa
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The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Prevailing tax rates and reliefs are dependent on your individual circumstances and are subject to change.
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