As well as TSB picking up the Best Junior ISA Provider prize at the YourMoney.com Personal Finance Awards 2024, it was also named the Best Everyday Savings Account Provider.
Throughout the year, YourMoney.com has shared the expertise of the winners, and this time it’s the turn of Peter Hatton, head of savings at TSB. He explains the five key reasons to start saving for your child’s ISA nest egg.
As parents, we want to make sure our children have the best start in life. And, if you can afford to put away some money each month, an ISA for them can be a game-changer. With tuition fees, housing costs, and life’s unpredictable expenses on the rise, a nest egg built over time through an ISA can provide money confidence and financial security. Here are five powerful reasons why starting an ISA for your child should be on your radar.
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1. Harness the power of compounding early
When you start investing in a Junior ISA (JISA) early, you give your contributions time to grow exponentially. By reinvesting the interest or returns earned, you increase the base amount on which future returns are calculated. Over time, your child’s nest egg can grow far more than if you had started later, even with smaller contributions.
2. Tax-free growth maximises savings
One of the biggest advantages of an ISA is its tax-free status. Contributions made to a JISA grow free from income and capital gains tax (CGT), meaning that your child can benefit fully from the returns without any tax deductions. By choosing to save in a JISA, you’re maximising every pound saved. This tax efficiency is a significant advantage over standard savings accounts, and when you start early, this tax-free growth becomes even more impactful.
3. Boost financial responsibility for your child
Setting up an ISA for your child isn’t just about building a nest egg; it’s also an excellent way to start teaching them about money and how to manage your finances. When they turn 18, they gain full control of the ISA, helping them learn how to manage money responsibly at a pivotal time in their life. By involving them in discussions about the ISA over the years – such as how it works, why it’s growing, and what it could be used for – you’re helping lay the groundwork for financial literacy and instilling habits to last a lifetime.
4. Support for education or first home purchase
One of the most practical reasons to set up a JISA is to provide a financial cushion for significant life expenses. Higher education and housing costs continue to rise, and by saving now, you’re giving your child the chance to start adulthood on a more secure financial footing. The money saved in an ISA could help cover tuition fees, reduce student loan dependence, or contribute to a first home deposit. This financial head start will give your child money confidence, helping them pursue dreams and goals more freely.
5. Flexible contribution options make it manageable
You don’t need to be a high-income earner to start a JISA; even small, consistent contributions can add up over time. With annual contribution limits (currently set at £9,000 per year for a JISA), parents, grandparents, and other family members can all contribute. TSB offers flexible monthly or annual contributions, making it manageable to add to your child’s savings gradually. This flexibility allows you to save in a way that suits your family’s financial situation and adapt as your circumstances change.
A small step with big rewards
Starting a JISA for your child is more than just setting money aside; it’s an investment in their future freedom and financial security. By starting early, you’re setting up your child to begin adulthood with greater money confidence.
TSB is a retail bank with a trusted customer brand, heritage stretching back to the start of the savings bank movement 200 years ago, and a committed workforce that offers full-service banking to more than five million customers. It operates on a modern banking platform and serves its customers through digital channels, over the phone and in branches across the UK.
