19th October 2015
A massive £405m of the £582m subscribed into Junior ISA in 2014/15 went into cash according to numbers form HMRC, leaving many unlikely to enjoy decent long-term growth.
Official stats showed that 365,000 cash Junior ISA accounts opened, compared to just 145,000 stocks and shares versions.
An investment into a stocks and shares Junior ISA is likely to provide a better long term return, although there will be more ups and downs along the way.
Junior ISAs have been available since 1 November 2011 to children under the age of 18, who do not have a Child Trust Fund – essentially most children born on or after 1 September 2002 to 2 January 2011.
With a Junior ISA, savers to invest up to £4,080 in the current tax year and all gains and interest are tax-free.
Looking at the appetite for cash Junior ISAs, Danny Cox, chartered financial planner at Hargreaves Lansdown said: “For the majority of Junior ISA investors, cash is simply the wrong choice and parents and grandparents should be looking to a stocks and shares Junior ISA to improve the potential returns.
“Investing for new born children or grandchildren is the most popular time with nearly 30% of HL Junior ISAs being set up before the child reaches their first birthday. Sensibly these parents and grandparents are recognising that over the longer term a stocks and shares Junior ISA is likely to provide a much better return than a cash Junior ISA.
“We have also seen that when young people are given a capital sum at age 18, it doesn’t just become a beer fund. Almost all of them hold on to their investment for at least a year and 46% invest further into their account.”