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Just 1% of 18-year-olds cash in their Junior ISA

Joanna Faith
Written By:
Joanna Faith

The overwhelming majority of children with Junior ISAs choose not to cash in their money when they reach 18, a new study reveals.

To mark the second anniversary of the product, execution-only broker Hargreaves Lansdown analysed 837 Junior ISA accounts where the child had reached the age of 18.

It found that 98% of 18 year olds kept their ISA, while a third chose to top them up with their own contributions.

Junior ISAs are automatically converted to adult ISAs when the account holder reaches 18. They then have legal control of the money and can choose whether to cash it in, keep it invested or top it up with more money. Up until 18, the child has no access to the money in the Junior ISA.

Danny Cox, head of financial planning at Hargreaves Lansdown, said: “This research shows that if you show children how to be a responsible investor, the vast majority of them do the right thing.

“Instilling good financial habits at an early age sets children on the right road to long term financial security.”

Junior ISAs were launched on 1 November 2011 as a long term replacement for Child Trust Funds (CTFs), which were closed to new entrants in 2010. Junior ISAs work in a similar way to adult ISAs. The maximum contribution of £3,720 a year can be divided between cash and stocks and shares Junior ISAs. This will rise to £3,840 from 6 April 2014.

Parents who save £100 a month into a Junior ISA for 18 years can end up with a pot worth £38,000 assuming a 6% annual investment return, according to Hargreaves analysis.