Grandparents urged to choose stocks and shares JISAs over cash
The analysis conducted by the Centre for Economics and Business Research (Cebr) on behalf of Scottish Friendly looked at the returns generated by cash JISAs compared to equity JISAs.
It found that a grandparent who saved the maximum amount into a cash JISA paying 1% AER each year since 2011, would have contributed £44,836 in total and would have made £2,241 in interest.
But a grandparent who invested the same amount of money into a stocks and shares JISA containing a fund mirroring the FTSE All Share Index would have made a £2,691 profit in the same time.
That’s a £450, or 20%, increase compared with the cash account.
The figures compiled by the Cebr also show grandparents could give their grandchildren’s savings a boost even if they don’t max out their annual JISA contributions.
For example, a grandparent saving £1,200 into a cash JISA each year since 2011 would have made £705 in interest from their £12,000 of savings.
But someone who instead invested in a stocks and shares JISA would be sitting on a £923 profit now – a £218, or 30% difference.
Scottish Friendly says the figures demonstrate the stock market’s potential to generate higher returns to cash over the long term.
Kevin Brown, savings and investment specialist at Scottish Friendly, says: “Many of us want to be able to help out children and grandchildren to have the best start in life by saving or investing for their futures.
“But at the same time the research suggests that many of us are not making our money work as hard as it could because we are wedded to the idea of saving into a poor-paying cash savings account.
“Our research clearly shows that for those who want to maximise their grandchild’s returns, investing gives them more potential for growth for that money rather than keeping it in a secure savings account that is paying little over 1% at best.
“However, we know that part of the reason some people tend not to invest is because they feel they don’t know how or are afraid of losing money. That’s completely understandable.”