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Child ISAs & Trust Funds - How to Support Your Child's Financial Future

Mike Hunt

All of us wish for the best for our children, and it makes sense to plan early to ensure their economic stability in the future.

Financial planning for your family is becoming increasingly important in these times of economic uncertainty. Let's look at the advantages of both the Child ISA and Trust Fund here in this blog post.

Children's Individual Savings Accounts (ISAs)

The UK government has encouraged families to save for their children's futures through JISA program.

Individual Savings Account - Junior ISA - is the name of the program. You place your money in a regular savings account and receive a guaranteed interest rate, like an ordinary ISA. Your ISA savings are also completely tax-free. As soon as your child turns 18, they receive the cash they need for school, training, or anything they wish.

However, we all know that this only makes any sense if the interest rate paid on savings beats inflation rates - and in the current environment, this is not possible.

You can invest in securities under the Junior ISA scheme as an alternative to this problem - your returns will depend on the performance of the bonds and shares underlying the investment.

As of 2021-2022, Junior ISAs have a savings limit of nine thousand pounds. Bonds and shares are two ways of saving money, and the amount you save will be split in whatever percentage you wish.

With the right guidance, allowing your child to make binary investment decisions could also prove to be a valuable experience for them in the areas of banking, investing, and, of course, the value of money.

Nevertheless, if your child is still a little too young to decide where their future money should go, it is still a good and helpful example to see you set aside money continually for them.

Furthermore, an ISA provides complete security for your money. Your child's Junior ISA will become an adult ISA automatically at the age of 18, meaning no tax benefits will be lost - what a double bonus! It is also imperative that you only invest in ISAs with UK-based providers and that you have less than £85,000 in the account in question.

Children's trust funds

If your child was born between 1st September 2002 and 2nd January 2011, there is a possibility that the government automatically created a Child Trust Fund for them.

Your financial institution can convert an existing Trust Fund into a Junior ISA if your child already has one.

This is something worth considering since CTFs generally offer lower interest rates than ISAs. Get in touch with one of our advisers today to schedule a complimentary consultation if you have any questions about which savings scheme would be best for you and your child.

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